Accounting for Decision Making Study Guide Questions
Course Introduction
Accounting for Decision Making introduces students to the fundamental concepts and techniques of accounting with a focus on how financial information supports managerial decision-making. The course covers essential topics such as cost analysis, budgeting, financial statement interpretation, and performance measurement. Students will learn how to use accounting data to evaluate business performance, make strategic choices, and solve practical problems within organizations. Through case studies and real-world examples, the course emphasizes the role of accounting information in planning, controlling operations, and making informed business decisions.
Recommended Textbook
Cornerstones of Financial Accounting 2nd Edition by Jay Rich
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12 Chapters
1918 Verified Questions
1918 Flashcards
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Page 2
Chapter 1: Accounting and the Financial Statements
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202 Flashcards
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Sample Questions
Q1) Which one of the following is not an external user of financial statements?
A)Internal Revenue Service
B)Creditors
C)Stockholders
D)The Company's President
Answer: D
Q2) Refer to Bass Tours.If the average current ratio for similar companies is 2.0 to 1,what does this tell you about this company's liquidity?
A)The company is more liquid than its competitors.
B)The company has more long-term assets than its competitors.
C)The company is bankrupt.
D)The company is more profitable than its competitors.
Answer: A
Q3) Businesses engage in which of the following three main activity categories?
A)Financing,Investing,Operating
B)Cash,Credit,Noncash
C)Financing,Credit,Operating
D)Financing,Management,Operating
Answer: A
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Page 3
Chapter 2: The Accounting Information System
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Sample Questions
Q1) Refer to HVAC Service.The journal entry to record payment of the salaries will include a credit to
A)Salary Expense
B)Salary Payable
C)Prepaid Salaries
D)Cash
Answer: D
Q2) A consulting firm provided services last month and billed its client.This month,the company received payment from the customer.What impact does this month's transaction have on the firm's working capital?
A)Increase
B)Decrease
C)No net effect
D)Unable to determine with this limited information.
Answer: C
Q3) The general ledger is often used for the initial recording of repetitive transactions.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Accrual Accounting
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Sample Questions
Q1) Carver Memorial Gardens purchased supplies for $14,500 during the year.At January 1,supplies on hand were $1,000.At December 31,supplies on hand are $3,500.Determine the amount of supplies expense for the year.
A)$14,500
B)$12,000
C)$13,500
D)$17,000
Answer: B
Q2) Why does the accrual basis of accounting require adjustments,while the cash basis does not?
Answer: Adjustments are necessary under the accrual basis because income represents the amounts that are earned during the period,not just collected in cash.Accrual basis includes expenses that have been incurred regardless of whether payment has been made.Net income under the accrual basis represents the net effect of amounts earned,less amounts incurred,while under the cash basis only receipts and payments of cash are recorded.
Q3) A(n)____________________ revenue results when cash is received before it is earned and reported on the income statement.
Answer: unearned
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Page 5
Chapter 4: Internal Control and Cash
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Sample Questions
Q1) Each of the following documents is used in the control of cash receipts
<b>except</b>:
A)NSF checks
B)Outstanding checks
C)Bank deposit slips
D)Bank credit memos
Q2) ____________________ are those investments and deposits with financial institutions that are readily convertible into known amounts of cash and that have original maturities of three months or less.
Q3) Which of the following items would be added to the company's cash balance on a bank reconciliation?
A)Outstanding checks
B)Deposits in transit
C)Bank service charges
D)Interest earned on the bank account
Q4) The stronger the system of internal control,the higher the accuracy of the company's accounting records and financial reports.
A)True
B)False
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Chapter 5: Sales and Receivables
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Sample Questions
Q1) Affinity Services Group received a 12%,6-month promissory note with a principal amount of $10,000 from a customer for the sale of merchandise on December 1,2012.
A) How much interest revenue will the company re cognize as of December 31,2012 ?
B) How much interest revenue will the company recognize in \( 2013 ? \)
C) Determine the total amount of cash the company will collect on the date of the note's maturity.
Q2) Refer to Accutemp Heating & Air.Identify the maturity date of the note.
Q3) A company needs to record 6 months of accrued interest on a 4-year,12%,$12,000 promissory note payable.How much interest expense should be accrued?
A)$2,160
B)$1,440
C)$1,080
D)$720
Q4) A(n)____________________ is the buyer of receivables,who acquires the right to collect the receivables and assumes the risk of uncollectibility.
Q5) To encourage prompt payment,sellers offer a(n)____________________.
Q6) Identify two methods of accelerating cash from sales.
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Page 7
Chapter 6: Cost of Goods Sold and Inventory
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Sample Questions
Q1) Refer to the information provided for Lemke Corp.How much is ending inventory on April 30th?
A)$265.45
B)$312.00
C)$318.55
D)$324.00
Q2) Refer to the information provided for Klump Co.If the company uses the LIFO inventory costing method,cost of goods sold for the month of June is:
A)$2,538.00
B)$2,550.00
C)$2,551.25
D)$2,555.00
Q3) Refer to the information provided for Paschal Exports.If the moving average cost method of inventory costing is used,determine the following amounts:
A)Cost of goods sold for the units sold on July 10th?
B)Ending inventory on July 31st?
Q4) Under a periodic inventory system,shipping costs are not charged to the inventory asset account.Instead,such costs are charged to the ____________________ account.
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Chapter 7: Operating Assets
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Sample Questions
Q1) How are research and development costs reported in the financial statements? Why is this treatment required?
Q2) The intangible asset called ____________________ can only exist if one company purchases another business and the cost exceeds the fair market values of the identifiable net assets at the time acquired.
Q3) Refer to Fantasy Cruise Lines.Compute the amount of depreciation expense for the year ended December 31,2012.
A)$ 90,000
B)$100,000
C)$180,000
D)$200,000
Q4) When plant assets are purchased in a group,each asset is debited to the respective plant asset account for its fair market value at the time of acquisition.
A)True
B)False
Q5) Distinguish between current assets and operating assets.
Q6) Why do many companies use MACRS (Modified Accelerated Cost Recovery System)depreciation for tax purposes?
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Chapter 8: Current and Contingent Liabilities
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Sample Questions
Q1) When a retail company sells products to customers on credit for the amount of the sales price plus the applicable sales tax,the related journal entry includes a debit to accounts receivable,a credit to sales revenue,and a credit to
Q2) When a company uses past experience to estimate the amount of likely warranty claims in the future,a current liability account must be created.
A)True
B)False
Q3) A(n)____________________ arises when a business purchases goods or services on credit.
Q4) Assume that a company has a cash ratio of .45.Recording the estimated warranties expense on the period's sales would cause the cash ratio to A)decrease.
B)increase.
C)be unchanged since the effects offset one another.
D)be unchanged since it has no impact on any current asset or liability accounts.
Q5) ____________________ refers to the ability of a company to meet its short-term obligations.
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Chapter 9: Long-Term Liabilities
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Sample Questions
Q1) The effective interest method amortizes premium or discount in a manner that produces a ____________________ rate of interest from period to period.
Q2) Which of the following would describe a callable bond?
A)Borrower has the right to pay off the bonds prior to due date.
B)Borrower has the right to issue more bonds prior to due date of existing bonds.
C)Borrower has the right to call off the interest payments on the bonds.
D)Investor has the right to call off the interest payments on the bonds.
Q3) Convertible bonds are attractive to bondholders because
A)they usually carry a higher rate of interest than non-convertible bonds.
B)they carry a convertible interest rate that can be increased when the market rate of interest increases.
C)they can be converted into stock at the bondholder's option.
D)the issuing company cannot retire the bonds before maturity.
Q4) A lease is accounted for as an operating lease if the present value of the lease payments is at least 90 percent of the fair value of the leased property.
A)True
B)False
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11
Chapter 10: Stockholders Equity
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Sample Questions
Q1) Issued stock that is repurchased by the corporation but<b> not</b> retired is
Q2) Which of the following is true for a corporation that issues 1,000 shares of $2 par common stock at $5 per share?
A)The common stock account will increase by $5,000.
B)$2 per share is the maximum selling price for these shares of stock.
C)Total stockholders' equity will increase by $5,000.
D)The per share dividend amount on these shares is $2.
Q3) Refer to Landmark Company.If the company repurchased 500 shares of its common stock for $20 per share,what is the amount of total stockholders' equity after this transaction?
A)$1,510,000
B)$1,500,000
C)$1,494,000
D)$1,490,000
Q4) Par value is adjusted annually to reflect the current market value of the stock.
A)True
B)False
Q5) Distinguish between stock warrants and stock options.
Q6) What is treasury stock and how is it reported in the financial statements?
Page 12
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Chapter 11: The Statement of Cash Flows
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Sample Questions
Q1) The purchase of inventory is an important ____________________ activity for a retailer.
Q2) A company acquired land by issuing its common stock.How should this transaction be disclosed when a statement of cash flows is prepared?
A)In a supplemental schedule of noncash investing and financing activities or in a note.
B)The acquisition of land should be reported as an investing activity and the issuance of the stock as a financing activity.
C)In a separate section of the statement of cash flows.
D)The transaction does not need to be disclosed.
Q3) To be classified as a cash equivalent,an item must be readily convertible to a known amount of cash and have an original maturity to the investor of three months or more.
A)True
B)False
Q4) An increase in retained earnings indicates that a cash dividend has been paid.
A)True
B)False
Q5) What is the amount of cash and cash equivalents at the end of 2014?
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Chapter 12: Financial Statement Analysis
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Sample Questions
Q1) As a general rule,all users of financial statements seek answers to the same questions.
A)True
B)False
Q2) ____________________ assets generally include cash,accounts receivable,and short-term investments.
Q3) Earnings per share is an indication of how much
A)cash the company has for each share of all outstanding stock.
B)earnings the company has for each share of outstanding common stock.
C)earnings the company has for each share of all outstanding stock.
D)dividends the company paid for each share of outstanding common stock.
Q4) The three aspects of return on equity (ROE)recognized by DuPont analysis are the net profit margin percentage,the ____________________ ratio,and leverage.
Q5) Refer to Rainsoft Company.What is the current ratio for 2015?
A)0.60
B)0.99
C)1.34
D)1.68
Q6) ____________________ analysis compares a single corporation across time
Page 14
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