Accounting for Decision Making Test Preparation
Course Introduction
Accounting for Decision Making explores the role of accounting information in managerial planning, control, and decision-making processes. This course covers key accounting concepts and tools used to analyze financial data, interpret reports, and assess business performance. Emphasizing cost behavior, budgeting, variance analysis, and responsibility accounting, students learn to make informed operational and strategic choices that enhance organizational value. Real-world case studies and practical exercises develop skills in applying accounting information to solve business problems and support effective decision making in diverse organizational settings.
Recommended Textbook
Financial Accounting 2nd Edition by J. David Spiceland
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15 Chapters
1948 Verified Questions
1948 Flashcards
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Page 2
Chapter 1: Accounting Information and Decision Making
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165 Verified Questions
165 Flashcards
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Sample Questions
Q1) McGill purchases additional office equipment to better serves its customers.This purchase is classified as what type of activity?
A)Company activity.
B)Financing activity.
C)Investing activity.
D)Operating activity.
Answer: C
Q2) Accountants are responsible for measuring various operating,investing and financing activities.Which of the following correctly matches the activity with its type?
A)Investing - paying utilities for the month.
B)Investing - purchasing land.
C)Operating - paying dividends to stockholders.
D)Financing - selling equipment for cash.
Answer: B
Q3) Financing activities are transactions involving externals sources of funding.
A)True
B)False
Answer: True
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3
Chapter 2: The Accounting Information System
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171 Verified Questions
171 Flashcards
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Sample Questions
Q1) The Dividends account increases with a credit and decreases with a debit.
A)True
B)False Answer: False
Q2) If total debits equal total credits in the trial balance,then all balances are correct.
A)True
B)False Answer: False
Q3) Which of the following is not part of measuring external transactions?
A)Using source documents to analyze accounts affected.
B)Recording transactions.
C)Making payments on all amounts owed.
D)Analyzing transactions for their effect on the accounting equation.
Answer: C
Q4) Unearned Revenue is a liability account.
A)True
B)False Answer: True
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Chapter 3: The Financial Reporting Process
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158 Verified Questions
158 Flashcards
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Sample Questions
Q1) The closing entry for expenses includes:
A)A debit to Dividends and a credit to all expense accounts.
B)A debit to Retained Earnings and a credit to all expense accounts.
C)A debit to Revenues and a credit to Retained Earnings.
D)A debit to Revenues and a credit to all expense accounts.
Answer: B
Q2) Closing entries transfer the balances of all temporary accounts (revenues,expenses,and dividends)to the balance of the Common Stock account.
A)True
B)False
Answer: False
Q3) When the balance of the Unearned Revenue account decreases during an accounting period:
A)Accrual-basis revenues exceed cash collections from customers.
B)Accrual-basis expenses exceed cash collections from customers.
C)Accrual-basis revenues are less than cash collections from customers.
D)Accrual-basis net income is less than cash-basis net income.
Answer: A
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Chapter 4: Cash and Internal Controls
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Sample Questions
Q1) After preparing a bank reconciliation,the service fee charged by the bank would be recorded with:
A)A credit to Service Fees Expense.
B)A debit to Cash.
C)A credit to Service Fees Revenue.
D)A debit to Service Fees Expense.
Q2) Which of the following is correct regarding a petty cash fund?
A)Petty cash fund represents cash on hand at the business for quick access.
B)Petty cash fund is used for minor purposes.
C)When cash from this fund is taken out,it should be replaced with a voucher.
D)All of the above are correct.
Q3) The Sarbanes-Oxley Act is also known as Generally Accepted Accounting Principles.
A)True
B)False
Q4) The petty cash fund represents cash on hand and is used to pay for minor purchases.
A)True
B)False
Q5) Describe the procedures used to reconcile a company's cash balance.
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Chapter 5: Receivables and Sales
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) Which of the following is recorded by a credit to Accounts Receivable?
A)Sale of inventory on account.
B)Estimating the annual allowance for uncollectible accounts.
C)Estimating annual sales returns.
D)Write-offs of bad debts.
Q2) Under the allowance method,when a company writes off an account receivable as an actual bad debt,it reduces total assets.
A)True
B)False
Q3) Two important ratios that help in understanding the company's effectiveness in managing receivables are the receivables turnover ratio and the average collection period.
A)True
B)False
Q4) Under the direct write-off method,what adjustment is made at the time an actual bad debt occurs?
A)Debit Bad Debt Expense,credit Allowance for Uncollectible Accounts.
B)Debit Allowance for Uncollectible Accounts,credit Accounts Receivable.
C)Debit Bad Debt Expense,credit Accounts Receivable.
D)No adjustment is made.
Page 7
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Chapter 6: Inventory and Cost of Goods Sold
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) The primary reason for the popularity of LIFO is that it gives:
A)Better matching of physical flow and cost flow.
B)A lower income tax obligation.
C)Simplified recordkeeping.
D)A simpler method to apply.
Q2) When inventory costs are declining,__________ generally results in a higher amount of reported net income.
Q3) During periods of rising costs,LIFO generally results in a higher cost of goods sold.
A)True
B)False
Q4) The practice of using the lower-of-cost-or-market to evaluate inventory reflects which of the following accounting principles?
A)Matching principle.
B)Revenue recognition.
C)Conservatism.
D)Materiality.
Q5) Sales revenue minus cost of goods sold is referred to as operating income.
A)True
B)False
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Chapter 7: Long-Term Assets
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) Research and development costs incurred in developing a patent internally are not recorded as an intangible asset in the balance sheet,but rather are expensed directly in the income statement.
A)True
B)False
Q2) The balance sheet of Cattleman's Steakhouse shows assets of $86,400 and liabilities of $15,000.The fair value of the assets is $90,000 and the fair value of its liabilities is $15,000.Longhorn paid Cattleman's $95,000 to acquire it.Longhorn should record goodwill on this purchase of:
A)$3,600.
B)$5,000.
C)$20,000.
D)$23,600.
Q3) When a firm develops a trademark internally through advertising,it does not record the advertising costs as an intangible asset,but rather expenses them in the income statement.
A)True
B)False
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9
Chapter 8: Current Liabilities
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Sample Questions
Q1) Assuming a current ratio of 1.0 and an acid-test ratio of 0.80,how will the borrowing of cash by issuing a six-month note payable affect each ratio?
A)Increase the current ratio and increase the acid-test ratio.
B)No change to the current ratio and increase the acid-test ratio.
C)Decrease the current ratio and decrease the acid-test ratio.
D)Decrease the current ratio and increase the acid-test ratio.
Q2) Assuming a current ratio of 1.2 and an acid-test ratio of 0.80,how will the purchase of inventory with cash affect each ratio?
A)Increase the current ratio and increase the acid-test ratio.
B)No change to the current ratio and decrease the acid-test ratio.
C)Decrease the current ratio and decrease the acid-test ratio.
D)Decrease the current ratio and increase the acid-test ratio.
Q3) A line of credit is an informal agreement that permits a company to borrow up to a prearranged limit without having to follow formal loan procedures and paperwork.
A)True
B)False
Q4) Why is it important to distinguish between current and long-term liabilities?
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Chapter 9: Long-Term Liabilities
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Sample Questions
Q1) Raiders Company issues a bond with a stated interest rate of 10%,face value of $50,000,and due in 5 years.Interest payments are made semi-annually.The market rate for this type of bond is 8%.What is the issue price of the bond?
A)$83,920
B)$46,320
C)$54,055
D)$50,000
Q2) Stealth Fitness Center issues 7%,10-year bonds with a face amount of $200,000.The market interest rate for bonds of similar risk and maturity is 8%.Interest is paid semiannually.At what price will the bonds be issued?
Q3) THA issued the bonds:
A)At par.
B)At a premium.
C)At a discount.
D)Cannot be determined from the given information.
Q4) Unsecured bonds are not backed by a specific asset.
A)True
B)False
Q5) Why do some companies issue bonds rather than borrow money directly from a bank?
Page 11
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Chapter 10: Stockholders Equity
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136 Flashcards
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Sample Questions
Q1) We compute the return on equity ratio by dividing net income by ending stockholders' equity.
A)True
B)False
Q2) Treasury stock is a contra-equity account since treasury stock increases total stockholders' equity..
A)True
B)False
Q3) Which of the following is not a potential feature of preferred stock?
A)Convertible.
B)Redeemable.
C)Cumulative.
D)They all are potential features of preferred stock.
Q4) Convertible preferred stock allows the stockholder to exchange shares of preferred stock for common stock at a specified conversion ratio.
A)True
B)False
Q5) Describe the primary advantages and disadvantages of a corporation in comparison to a sole-proprietorship or partnership.
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Chapter 11: Statement of Cash Flows
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Sample Questions
Q1) Using the direct method,we examine each account in the income statement and convert it from an accrual amount to a cash amount.
A)True
B)False
Q2) Using the direct method we adjust the items on the income statement to directly show the cash inflows and outflows from operations.
A)True
B)False
Q3) Fidelity Systems reports net income of $80 million.Included in that number is depreciation expense of $8 million,and a gain on the sale of equipment of $1 million.Records reveal increases in Accounts Receivable,Inventory,and Accounts Payable of $4 million,$3 million,and $2 million,respectively.Calculate Fidelity's net cash flows from operating activities.
Q4) Cash paid for financing activities would include cash paid for:
A)the stock of another company.
B)dividends to stockholders.
C)the purchase of treasury stock.
D)b and c.
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Page 13
Chapter 12: Financial Statement Analysis
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136 Flashcards
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Sample Questions
Q1) Return on assets equals:
A)Gross profit ratio x Inventory turnover.
B)Profit margin x Inventory turnover.
C)Gross profit ratio x Asset turnover.
D)Profit margin x Asset turnover.
Q2) We use vertical analysis for income statement accounts,but not balance sheet accounts.
A)True
B)False
Q3) A low inventory turnover ratio usually is a positive sign and indicates that inventory is selling quickly.
A)True
B)False
Q4) Comparing changes in net income for one company over time is an example of:
A)Vertical analysis.
B)Horizontal analysis.
C)Diagonal analysis.
D)Both vertical and horizontal analysis.
Q5) Explain the difference between vertical and horizontal analysis.
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Chapter 13: Time Value of Money
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Sample Questions
Q1) Michaela would like to have $10,000 for a European vacation in four years.Currently,she has saved $8,000.If she puts $8,000 in an account that earns 6% interest,compounded annually,will she be able to take the vacation in four years?
Q2) Miller borrows $300,000 to be paid off in three years.The loan payments are semiannual with the first payment due in six months,and interest is at 6%.What is the amount of each payment?
A)$55,379.
B)$106,059.
C)$30,138.
D)$60,276.
Q3) The present value of $1,000 received three years from today with a discount rate of 10% is less than the present value of a $500 annuity with the same discount rate over the same period.
The three-year annuity represents three payments of $500 (= $1,500),so the present value of the annuity is greater.
A)True
B)False
Q4) Briefly describe the difference between simple interest and compound interest.
Q5) Explain the difference between present value and future value.
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Chapter 14: Investments
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52 Verified Questions
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Sample
Questions
Q1) Investments are reported at fair value when a company has a significant influence over another company in which it invests.
A)True
B)False
Q2) Interest revenue is calculated as the carrying value of the investment in bonds times the stated interest rate.
A)True
B)False
Q3) Consolidated financial statements are prepared when one company has:
A)Accounted for the investment using the equity method.
B)Accounted for the investment as available-for-sale securities.
C)Control over another company.
D)None of these is correct.
Q4) When the investor has insignificant influence,the receipt of cash dividends is recorded as dividend revenue.
A)True
B)False
Q5) Discuss the meaning of consolidated financial statements.When is it appropriate to consolidate financial statements of two companies?
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Chapter 15: International Financial Reporting Standards
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Sample Questions
Q1) Assuming rising costs,the switch from LIFO to FIFO or average cost would most likely have what effect(s)?
A)Increase reported net income in the income statement.
B)Decrease tax obligations to the Internal Revenue Service (IRS).
C)Increase reported net income and tax obligations.
D)Decrease reported net income and tax obligations.
Q2) When a country establishes financial reporting rules that closely resemble tax reporting rules,reported accounting profits tend to be:
A)Negative.
B)Higher.
C)Lower.
D)Misreported.
Q3) IFRS stands for:
A)Independent Financial Reporting System.
B)International Financing Reform System.
C)International Financial Reporting Standards.
D)International Financial Regulation of Securities.
Q4) What does it mean to revalue a long-term asset? How do U.S.GAAP and IFRS differ regarding revaluation of long-term assets?
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