Accounting for Decision Making Test Preparation
Course Introduction
Accounting for Decision Making explores how financial and managerial accounting information is used to inform strategic and operational decisions in organizations. The course covers the fundamentals of interpreting and analyzing financial statements, budgeting, cost behavior, performance evaluation, and decision-relevant costing techniques. Students will learn how to apply accounting data to evaluate alternative courses of action, assess business performance, and support planning processes. Emphasis is placed on the practical use of accounting information by managers for effective decision-making in real-world business environments.
Recommended Textbook Fundamentals of Financial Accounting 5th Edition by Fred Phillips
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13 Chapters
2859 Verified Questions
2859 Flashcards
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Page 2
Chapter 1: Business Decisions and Financial Accounting
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211 Verified Questions
211 Flashcards
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Sample Questions
Q1) Expenses are reported on the:
A) income statement in the time period in which they are paid.
B) income statement in the time period in which they are incurred.
C) balance sheet in the time period in which they are paid.
D) balance sheet in the time period in which they are incurred.
Answer: B
Q2) Use the information above to answer the following question.The amount of retained earnings at the end of the year is
A) $15,000.
B) $11,000.
C) $12,000.
D) $1,000.
Answer: B
Q3) Revenue is reported on the income statement only if cash was received at the point of sale.
A)True
B)False
Answer: False
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3
Chapter 2: Reporting Investing and Financing Results on the Balance Sheet
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193 Flashcards
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Sample Questions
Q1) The analyze-record-summarize process is applied to daily transactions,to month-end adjustments,and as part of the year-end closing process.
A)True
B)False
Answer: True
Q2) Which of the following is not an accounting transaction?
A) Issued shares of stock to investors in exchange for cash contributions of $4,000.
B) Ordered inventory from suppliers for $3,000.
C) Sold equipment to another company for $3,000 and accepted a note from the company promising payment in 6 months.
D) Borrowed money from the bank by signing a promissory note for $2,000.
Answer: B
Q3) The current ratio:
A) is a measure of a firm's ability to pay its current liabilities.
B) equals current liabilities divided by current assets
C) equals total assets divided by total liabilities
D) is a measure of profitability
Answer: A
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Chapter 3: Reporting Operating Results on the Income Statement
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235 Flashcards
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Sample Questions
Q1) Which of the following statements about the unadjusted trial balance is not correct?
A) It might only include a preliminary amount for income tax expense.
B) It might balance even if there is a mistake.
C) It does not yet include end-of-the-accounting period adjustments.
D) It is part of the financial statements issued to external decision makers.
Answer: D
Q2) An expense:
A) will decrease the amount of net income on the income statement.
B) will decrease the amount of Common Stock on the balance sheet.
C) will be increased with a credit to the account.
D) normally has a credit balance.
Answer: A
Q3) When Harmony Inc.performs $1,000 of services on account for a customer,Harmony will record a journal entry with a debit to:
A) Cash and a credit to Accounts Receivable.
B) Accounts Receivable and a credit to Service Revenue.
C) Service Revenue and a credit to Unearned Revenue.
D) Cash and a credit to Accounts Payable.
Answer: B
Page 5
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Chapter 4: Adjustments,financial Statements,and Financial
Results
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Sample Questions
Q1) Supplies should be ______ and Supplies Expense should be ______ for supplies used up during the period.
A) increased increased
B) increased decreased
C) decreased decreased
D) decreased increased
Q2) To recognize the use of and benefit received from long-lived assets,such as equipment,during the accounting period,______ Expense should be recorded.
A) Depreciation
B) Supplies
C) Accumulated Depreciation
D) Interest
Q3) In recording an accrual adjustment to account for revenues earned but not yet collected:
A) an asset is decreased since cash is being paid at the time of the adjustment
B) the asset recorded when cash was paid is decreased as the revenue is earned
C) the asset recorded when cash was paid is increased as the revenue is earned
D) an asset is increased since cash will be collected at a later date
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Chapter 5: Fraud, Internal Control, and Cash
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188 Verified Questions
188 Flashcards
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Sample Questions
Q1) Petty cash payments are recorded in the accounting system when:
A) the petty cash fund needs to be replenished
B) a payment is made out of petty cash
C) a bank reconciliation is prepared for the petty cash fund
D) cash is received from returns of merchandise
Q2) Which of the following statements concerning a voucher is not correct?
A) The voucher consists of the purchase requisition, the purchase order, the receiving report, and the invoice.
B) The voucher is marked "paid" so that it cannot be accidentally or intentionally resubmitted for duplicate payment
C) The voucher must be prepared before the goods or services are ordered.
D) After the voucher is prepared, the company processes a check or electronic funds transfer to pay for the items purchased and received.
Q3) The fraud triangle identifies incentive,opportunity,and benchmarks as the requirements for a fraud to occur.
A)True
B)False
Q4) Define internal control and identify the objectives of internal control system.
Q5) Describe each of the five components of an internal control system.
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Chapter 6: Internal Control and Financial Reporting for Cash and
Merchandising
Operations
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Sample Questions
Q1) Cost of goods sold reports the:
A) cost of merchandise available to sell
B) cost of merchandise purchased
C) cost times the quantity of goods sold
D) selling price times the quantity of goods sold
Q2) A firm's beginning inventory is $35,000,goods purchased during the period cost $120,000,and the cost of goods sold for the period is $140,000.What is the amount of its ending inventory?
A) $45,000
B) $20,000
C) $25,000
D) $15,000
Q3) Bottom,Inc.paid an invoice for $1,000,with discount terms of 1/7,n/30,within the discount period and will write a check in the amount of:
A) $1,000.
B) $990.
C) $1,010.
D) $999.
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Chapter 7: Reporting and Interpreting Inventories and Cost of Goods
Sold
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Sample Questions
Q1) Beta Company uses a periodic inventory system.The company bought 80 units of inventory for $12 each and 20 units of inventory for $12.50 each.It sold 90 units for $25 each.Beta's weighted average cost is:
A) $12.10.
B) $12.25.
C) $16.50.
D) $12.
Q2) Your company has 100 units in inventory,purchased at $16 per unit.These units have a current market value of $14.The entry to write-down the inventory will include a:
A) credit to Cost of Goods Sold for $200.
B) debit to Cost of Goods Sold for $1,400.
C) credit to Inventory for $200.
D) debit to Inventory for $1,400.
Q3) Use the information above to answer the following question.What is the inventory turnover ratio?
A) 12.5 times
B) 13.4 times
C) 14.7 times
D) 2.2 times
Page 9
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Chapter 8: Reporting and Interpreting Receivables,bad
Debt Expense,and Interest Revenue
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Sample Questions
Q1) As of December 31,Frappe Company has a balance of $5,000 in accounts receivable.Of this amount,$500 is past due and the remainder is not yet due.Frappe has a credit balance of $45 in the Allowance for Doubtful Accounts.Frappe Company estimates its bad debt losses using the aging of receivables method,with estimated bad debt loss rates equal to 1% of accounts not yet due and 10% of past due accounts.How will the Bad Debt Expense account be included in the required adjusting journal entry at year-end?
A) Debit of $95
B) Credit of $95
C) Debit of $50
D) Credit of $50
Q2) On December 1,2015,a company lends a new employee $20,000 to assist with her relocation expenses.The employee signs a 6-month note,with interest of 9%.The company prepares year-end financial statements at December 31.What is the required adjusting entry at December 31 as a result of this note transaction?
A) Debit Interest Revenue and credit Interest Receivable for $900
B) Debit Interest Receivable and credit Interest Revenue for $900
C) Debit Interest Revenue and credit Interest Receivable for $150
D) Debit Interest Receivable and credit Interest Revenue for $150
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Chapter 9: Reporting and Interpreting Long-Lived Tangible and Intangible Assets
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Sample Questions
Q1) A declining fixed asset turnover ratio can be caused by acquiring additional assets in the current period in anticipation of increased revenue in the future.
A)True
B)False
Q2) Flynn Company purchased a building for $400,000.At the end of the current year,the book value of the building is $220,000 and its fair value is $180,000.Assuming the building is rented to a tenant,the sum of future cash flows from the rental of the building is expected to be $160,000.What is the amount of impairment loss?
A) $0
B) $20,000
C) $40,000
D) $120,000
Q3) Which of the following characteristics is not associated with intangible assets?
A) Lack physical substance.
B) Those with an unlimited life are not amortized.
C) Usually have a residual value.
D) Amortization expense is reported each period for those with finite lives.
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Page 11
Chapter 10: Reporting and Interpreting Liabilities
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Sample Questions
Q1) A 10-year bond that pays interest annually was issued at a $5,000 premium.The entry to record the payment of interest using straight-line amortization will include a ______ to Premium on Bonds Payable for ______ each period.
A) credit $500
B) debit; $500
C) debit a greater amount each period
D) credit a lower amount each period
Q2) Using the simplified effective-interest amortization,interest expense is calculated as:
A) Bonds Payable, Net x Market Interest Rate x Time.
B) Bonds Payable, Net x Stated Interest Rate x Time.
C) Face Value x Stated Interest Rate x Time.
D) Face Value x Market Interest Rate x Time.
Q3) Which of the following items results in a contingent liability?
A) Income tax expense
B) A lawsuit filed against a company
C) Interest expense
D) Advertising expense
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12
Chapter 11: Reporting and Interpreting Stockholders Equity
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Sample Questions
Q1) Which of the following organizations is required by law to apply for a charter?
A) Sole proprietorship
B) Partnership
C) Any for-profit business
D) Corporation
Q2) The Retained Earnings balance was $22,900 on January 1.Net income for the year was $18,100.If Retained Earnings had a credit balance of $23,800 after closing entries were made for the year,and if additional stock of $5,200 was issued during the year,what was the amount of dividends declared during the year?
A) $17,200
B) $23,700
C) $23,300
D) $13,000
Q3) The number of shares outstanding equals the number of shares:
A) issued minus the number of shares in treasury.
B) authorized minus the number of shares issued.
C) issued plus the number of shares in treasury.
D) authorized plus the number of shares issued.
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13
Chapter 12: Reporting and Interpreting the Statement of Cash Flows
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Sample Questions
Q1) If a company uses the indirect method to determine cash flows from operating activities,gains:
A) must be added to net income and losses subtracted from net income.
B) and losses must be added to net income.
C) must be subtracted from net income and losses added to net income.
D) and losses must be subtracted from net income.
Q2) Which of the following represents a cash inflow from financing activities?
A) Issuing stock in exchange for another company's stock.
B) Paying a bond's face value at maturity.
C) Issuing long-term bonds at a discount.
D) Receiving interest on promissory notes.
Q3) Which of the following is the best measure of a company's profitability?
A) Cash-based net income
B) Accrual-based net income
C) Accounts Receivable
D) Sales Revenue
Q4) The payment of salaries and wages would be reported as an operating activity on the statement of cash flows.
A)True
B)False
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Chapter 13: Measuring and Evaluating Financial Performance
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Sample Questions
Q1) A company's sales are $285,000 and $200,000 during the current and prior years,respectively.The percentage change is:
A) 42.5%.
B) 70%.
C) 29.8%.
D) 130%.
Q2) Which of the following will not improve a company's gross profit percentage?
A) An increase in the sales price
B) A decrease in the cost of inventory
C) A decrease in the shipping cost for merchandise purchased
D) Collecting cash from customers in advance
Q3) To perform a vertical analysis of an income statement,you would divide each line item on the statement by:
A) sales.
B) cost of goods sold.
C) operating expenses.
D) net income.
Q4) The fixed asset turnover ratio is a profitability ratio.
A)True
B)False
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