Accounting for Decision Making Solved
Exam Questions
Course Introduction
Accounting for Decision Making introduces students to the fundamental concepts and techniques of accounting that are essential for effective business decision-making. The course focuses on the use of financial and managerial accounting information in planning, controlling, and evaluating business operations. Students learn to interpret financial statements, analyze costs, prepare budgets, and assess the financial implications of various business strategies. Emphasis is placed on applying accounting data to make informed decisions that enhance organizational performance and support long-term objectives.
Recommended Textbook
Introduction to Accounting An Integrated Approach 6th Edition by Penne Ainsworth
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Page 2
Chapter 1: Accounting and Business
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Sample Questions
Q1) Describe the three primary ownership structures and discuss the advantages and disadvantages of each.
Answer: Sole proprietorship - A business owned by one person whose personal possessions are at risk.Advantages: not sharing the profits.Disadvantages: not sharing the losses and risking personal possessions if the business fails.
Partnership - A business owned by two or more individuals whose personal possessions are at risk.Advantages: sharing the workload and the risk of ownership.Disadvantages: mutual agency,sharing the profits,and risking personal possessions if the business fails. Corporation - A business entity which is legally separate and distinct from its owners.Advantages: limited liability and unlimited life.Disadvantages: double taxation.
Q2) The primary objective of financial reporting is to
A)determine taxable income and income tax of a business.
B)provide management with information needed to run the day-to-day operations of a business.
C)keep businesses from going bankrupt.
D)provide information useful for making economic decisions.
Answer: D
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Page 3
Chapter 2: Business Processes and Accounting Information
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Sample Questions
Q1) On a bank reconciliation,which of the following will reduce the company's cash balance?
A)Outstanding check
B)Deposit in transit
C)Non-sufficient funds check
D)Bank error
Answer: C
Q2) The Capital Resources Process features which of the following pairs of activities?
A)Operating and Investing Activities
B)Financing and Investing Activities
C)Reporting and Operating Activities
D)Financing and Planning Activities
Answer: B
Q3) Which of the following is not part of an internal control system?
A)Providing independent checks
B)Separating incompatible duties
C)Physically controlling assets
D)Designing produce that meet the customers needs
Answer: D
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Page 4
Chapter 3: Operating Processes: Planning and Control
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Sample Questions
Q1) Which of the following would not be collected from the customer when an order is received?
A)Type of inventory ordered
B)Name of common carrier that will deliver the goods
C)Price Quoted
D)Delivery Date
E)All of the above will be collected
Answer: B
Q2) The estimated total housekeeping cost for a month with 1,400 room rentals is:
A)$22,012
B)$21,740
C)$20,350
D)$15,715
Answer: C
Q3) The formula for a fixed cost is:
A)Y = m(X)+ b where m is equal to 0.
B)Y = m(X)+ b where m is equal to 1.
C)Y = m(X)+ b
D)Y = m(X)+ b(X)
Answer: A
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Chapter 4: Short-Term Decision Making
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Sample Questions
Q1) Kapalua,Inc.manufactures hand held planners.The selling price per unit is $355.00,with variable costs per unit of $91.50.The corporate tax rate is 35%.If Kapalua can sell 15,000 units and can earn an after-tax profit of $1,513,000,total fixed costs must be:
A)$3,812,000
B)$3,952,000
C)$1,624,808
D)$1,372,500
Q2) Salaries of product-line managers are an example of a/an
A)unit-related cost.
B)batch-related cost.
C)facility-sustaining cost.
D)product-sustaining cost.
Q3) In making a decision regarding whether or not to sell a tract of land,the purchase price of the land is a(n):
A)incremental cost
B)opportunity cost
C)relevant cost
D)sunk cost
Q4) Explain why contribution margin is all profit above the breakeven point.
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Chapter 5: Strategic Planning Regarding Operating Processes
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Sample
Questions
Q1) Which of the following is not withheld from the employee's check?
A)Union Dues
B)Federal Income Tax
C)Social Security
D)All of the above are withheld
Q2) Capital Industries' president receives a bonus equal to 6% of net income.This bonus is included in the determination of net income.If the company's income before bonus was $3,800,000,the amount of the bonus is:
A)$215,094
B)$228,000
C)$242,553
D)cannot be determined from the information given
Q3) Model bakers have developed a snack cake that it wants to compete with Hostess Twinkies and has set their introductory price 10 cents below the price of a Twinkie.This Is an example of which of the following?
A)Penetrating pricing
B)Skimming pricing
C)Life-cycle pricing
D)Competitive cycle pricing
Page 7
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Chapter 6: Planning, The Balanced Scorecard, and Budgeting
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Sample Questions
Q1) What information must a firm have to prepare a sales budget? How does it get this information?
Q2) Lichti Industries sold 50,000 ice chests at $20 each during April of 2010.Unit sales are projected to increase 10% in May and June while the selling price will be increased by $1.00 for May and another $1 in June.The estimated sales revenue for June of 2010 is:
A)$1,331,000
B)$1,210,000
C)$1,270,500
D)$1,155,000
Q3) The final step in a master budget is the preparation of the:
A)cash budget
B)sales budget
C)pro forma financial statements
D)selling and administrative costs budget
Q4) A plan for the future expressed in quantitative terms is called a:
A)cycle
B)budget
C)commentary
D)mathematical model
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Chapter 7: Accounting Information Systems
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Sample Questions
Q1) When a firm has net income,which of the following is not an appropriate closing entry?
A)Debit Sales,credit Income Summary
B)Debit Retained Earnings,credit Income Summary
C)Debit Income Summary,credit Insurance Expense
D)Debit Income Summary,credit Depreciation Expense
Q2) A chronological record of accounting events is maintained in the:
A)general journal
B)general ledger
C)trial balance
D)T-accounts
Q3) The entry to record a purchase of supplies on account would include a:
A)debit to cash
B)debit to accounts receivable
C)credit to supplies
D)credit to accounts payable
Q4) How would the balance sheet and income statement be affected if a $2,000 accrued expense was recorded as $3,000?
Q5) Any event reported on the income statement has impacted the balance sheet.Explain why this is true.
9
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Chapter 8: Purchasinghuman Resourcespayment Process:
Recording and Evaluating Expenditure Process Activities
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Sample Questions
Q1) Explain the difference between a periodic inventory system and a perpetual one.If a firm uses a perpetual inventory system,it still has to physically count the inventory on hand at least once a year.Why?
Q2) Iowa Corporation had a beginning balance of $8,600 in Utilities Payable account at the start of the year and an ending balance of $4,000.During the year Iowa recorded $10,000 of utilities expense.How much cash did Iowa pay the utility company during the year?
A)$14,600
B)$5,400
C)$10,00
D)Can't be determined with the information given
Q3) An increase in prepaid insurance indicates that
A)insurance expense and insurance paid were equal
B)no insurance expense was recorded during the period
C)insurance expense for the period exceeded insurance paid
D)insurance paid during the period exceeded insurance expense
Q4) Why are subsidiary ledgers used?
Q5) Why would the amount of supplies expense differ from the amount of cash paid for supplies in a year?
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Chapter 9: Recording and Evaluating Conversion Process Activities
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Sample Questions
Q1) Dynamic company has an unfavorable material price variances and a favorable usage variance.Explain what might have caused both variances.
Q2) Determine the cost of direct materials issued into production.
A)$524,000
B)$306,000
C)$258,000
D)$250,000
Q3) A large U.S.manufacturer recently announced that it was "in the dark" about the costs of producing more than half its products.Why might this situation have adverse effects on the firm?
Q4) The standard cost for direct labor is $190,000 if the company produces 15,200 units of product.Actual direct labor cost to produce 15,800 units of product totaled $213,300.What is the standard cost for direct labor at the actual level of production:
A)$190,000
B)$197,500
C)$205,200
D)$213,300
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Chapter 10: Recording and Evaluating Revenue Process
Activities
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Sample Questions
Q1) In times of rising prices,______ generally result(s)in the ______ ending inventory.
A)LIFO and FIFO,same
B)LIFO,higher
C)FIFO,lower
D)LIFO,lower
Q2) During the current year,cost of goods sold was higher under the LIFO method than under the FIFO method.Which of the following statements about price changes is true?
A)Prices were unchanged.
B)Prices were decreasing.
C)Prices were increasing.
D)Unable to determine from the information given
Q3) The cost of goods sold for the June 21 sale is:
A)$480
B)$400
C)$440
D)$560
Q4) Briefly describe the makeup of ending inventory under the FIFO and LIFO methods.
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Chapter 11: Time Value of Money
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Sample Questions
Q1) All of the following are primary risk factors that generate risk premiums except:
A)inflation risk
B)business risk
C)relative risk
D)liquidity risk
Q2) Gina's Fashion plans to make semiannual deposits of $1,963.64 until she has accumulated $72,000.Assuming she earns 7% on her investment,Wagner will need to make a total of:
A)12 payments
B)36 payments
C)24 payments
D)cannot be determined from the information given
Q3) Ishvar Patel is going to make 5 annual deposits of $4,500 each into a savings account beginning on July 1,2010.Assuming an interest rate of 6%,on July 1,2014,Ishvar's bank account will have a balance of:
A)$28,521.90
B)$30,608.55
C)$18,955.80
D)$25,366.92
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Page 13
Chapter 12: Planning Investments: Capital Budgeting
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Sample Questions
Q1) A capital investment generates a satisfactory rate of return when its return is:
A)Greater than or equal to the cost of capital
B)Equal to or less than the cost of capital
C)Less than the cost of capital
D)Greater than the internal rate of return
Q2) Kaw Inc.had sales of $500,000 and cash operating expenses of $320,000 and depreciation expense of $50,000 for the year just ended.If Kaw's income tax rate is 40%,its net after-tax cash flows amounted to:
A)$108,000
B)$160,000
C)$130,000
D)$128,000
Q3) Explain how performance evaluation based on accrual accounting may lead to investment decisions that are not in the best interests of the firm.
Q4) All of the following are operational investments except an investment in:
A)corporate bonds
B)machinery
C)a building
D)a patent
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Chapter 13: Planning Equity Financing
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Sample Questions
Q1) Which of the following measures both the amount of a firm's debt financing and its equity financing?
A)Times interest earned ratio
B)Debt to equity ratio
C)Return on owners' equity
D)Return on common stockholders' equity
Q2) The Securities and Exchange Commission does not allow firms to report redeemable preferred stock in the stockholders' equity section of the balance sheet.Why do you suppose it imposes this restriction?
Q3) During the current year,Lisa,Tony,and Brian,who are partners in the Corsetti Company,had average capital balances of $41,000,$53,000,and $48,000,respectively.The partners share profits and losses by allowing a $16,000 salary to Lisa and a $14,000 salary to Brian,and a 12% return on average capital balances to all the partners.Any remaining income or loss is divided equally.If the company's income was $101,040,Brian's capital account would increase by:
A)$13,920
B)$33,680
C)$37,760
D)$53,440
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Page 15
Chapter 14: Planning Debt Financing
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Sample Questions
Q1) When the market rate of interest is less than a note's face rate of interest:
A)the note is issued at a discount
B)the note is issued at a premium
C)the proceeds of the note are less than the face value of the note
D)unable to determine from the information given
Q2) On Sept 1,2010 Innsbrook Corporation has just issued a $1,000,000 note.The note will have a ten-year life and a 12% face rate of interest that is paid annually. If the market rate of interest for the note is 10% what will be the proceeds of the note (how much cash will be the maker of the note will receive)?
Set up an amortization table for the note for the two years of the note's life.How much cash interest will Innsbrook pay during the first year of the note's life? How much interest expense will the note incur during the second year of the note's life?
Q3) The amount of cash raised from the issuance of debt is referred to as the:
A)redemption value
B)effective value
C)maturity value
D)cash proceeds
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Page 16
Chapter 15: Recording and Evaluating Capital Resource
Process Activities: Financing
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Sample Questions
Q1) Which of the following is true about a capital lease?
A)results in the recognition of depreciation expense on the leased asset
B)requires the recognition of a liability on the balance sheet
C)requires the reporting of periodic interest expense
D)all of the above are correct
Q2) Quality Corporation has 500,000 shares of $1 par value common stock authorized and 200,000 shares issued and outstanding.Land worth $100,000 received in exchange for 10,000 shares of common stock of the corporation would do all the following except:
A)increase the number of shares of common stock issued and outstanding to 210,000 shares
B)increase the total in the common stock account by $10,000
C)increase paid in capital in excess of par by $90,000
D)increase Retained Earnings by $100,000
Q3) Which of the following would tend to cause the market price of common stock to decrease?
A)declaration of reverse stock split
B)declaration of stock dividend
C)issuance of additional shares
D)purchase of treasury stock
Page 17
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Chapter 16: Recording and Evaluating Capital Resource
Process Activities: Investing
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Sample Questions
Q1) Kenyon Company purchased land and a building for $270,000.The appraised values of the land and building were $100,000 and $200,000,respectively.The purchase price allocated to the land should be:
A)$270,000
B)$180,000
C)$100,000
D)$ 90,000
Q2) The gain or loss recognized on the exchange would be:
A)$49,400 loss
B)$25,600 gain
C)$75,000 gain
D)no gain or loss should be recognized
Q3) Jackson Corporation has a forklift that it paid $40,000 for and that has a book value today of $14,000.Jackson is going to trade this forklift for a newer forklift with a market value of $55,000.Jackson Corporation is going to give its forklift and $25,000 cash to acquire the newer forklift.Make the entry to record the acquisition of the new forklift.
Q4) Explain why gains and losses are not recorded when a noncash exchange as not economic substance.
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Chapter 17: Company Performance: Profitability
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Sample Questions
Q1) Under unit-variable costing,
A)companies can increase income by increasing the number of units produced
B)all product and period costs are included in cost of goods sold
C)only costs that vary per unit are included in cost of goods sold
D)only direct material costs are included in cost of goods sold
Q2) Riegle Inc.'s income from continuing operations before taxes was $4,000,000 for the year ended December 31,2010.The company's effective tax rate is 30% and during the year the following events also took place:
The company sold one of its divisions at a gain of $500,000.The division had an operating loss of $325,000 through the date of disposal. Riegle is located in Chicago and a small earthquake damaged a warehouse owned by the company.The amount of the uninsured loss was $575,000.
Required: Prepare the lower portion of the income statement,from "income from continuing operations before taxes" through "net income",for the year ended 12/31/10.All during 2010 1,000,000 shares of stock were authorized and 850,000 were issued and 800,000 were outstanding.
Q3) Explain how a firm can manipulate income by increasing inventory under full absorption costing.
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Chapter 18: Company Performance: Owners Equity and Financial Position
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Sample Questions
Q1) Accumulated Depreciation-Buildings would be reported on the balance sheet in the:
A)long-term investment section
B)intangible asset section
C)current asset section
D)plant asset section
Q2) Inventory would be reported on the balance sheet as a(n):
A)plant asset
B)investment
C)current asset
D)intangible asset
Q3) Which of the following would be classified as an investment?
A)prepaid expenses
B)trading securities
C)estimated pension obligation
D)land held for sale in the future
Q4) Why would a banker reject a company's application for a one-year loan based on information taken from the company's balance sheet?
Q5) Evaluate the lower-of-cost-or-market method of reporting inventory in terms of conservatism and consistency.
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Chapter 19: Company Performance: Cash Flows
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Sample Questions
Q1) Which of the following activities is correctly associated with its cash flow classification?
A)Operating - Sale of company's own common stock
B)Financing - Purchase of Treasury Stock
C)Investing - Payment of rent for next two months
D)Financing - Payment of interest on bonds payable
Q2) Explain why many analysts consider operating activities the most important of the three activities reported on the statement of cash flow.
Q3) If accounts payable increased,cash paid for inventory would be equal to
A)ending inventory minus the accounts payable increase
B)ending inventory plus the accounts payable increase
C)purchases minus the accounts payable increase
D)purchases plus the accounts payable increase
Q4) Salaries payable decreased from 2009 to 2010.Using the indirect method (statement of cash flows),the decrease should be:
A)be subtracted from net income
B)be added to net income
C)have no adjustment made to net income
D)be added to the investing section of the statement of cash flows
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Chapter 20: Company Performance: Comprehensive Evaluation
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Sample Questions
Q1) If a company's balance sheet reported accounts receivable equal to $38,500,total current assets of $205,000,and total assets of $510,000,then a vertical analysis of the balance sheet would show a percentage figure for accounts receivable equal to:
A)100.0%
B)40.2%
C)18.8%
D)7.5%
Q2) Write out the dividend payout ratio ( Show your work here). Explain how is the dividend payout ratio is used.
Q3) Which of the following would be most useful in deciding whether or not to purchase a firm's common stock?
A)return on equity
B)return on assets
C)asset turnover
D)current ratio
Q4) Is a firm that has a high dividend payout ratio better to invest in than one that has a low dividend payout ratio? Why or why not?
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