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WGU D196 OBJECTIVE ASSESSMENT
PRINCIPLES OF FINANCIAL &
MANAGERIAL ACCOUNTING ACTUAL
NEWEST EXAM | QUESTIONS AND
VERIFIED ANSWERS WITH RATIONALE |
RATED A +
1. Which of the following best describes the accrual basis of
accounting?
A. Revenue is recorded when cash is received, and
expenses are recorded when paid
B. Revenue is recorded when earned, and expenses are
recorded when incurred
C. Revenue is recorded only at the end of the fiscal year,
and expenses are deferred until payment
D. Revenue is recorded when earned, and expenses are
recorded when paid
Rationale: Accrual accounting recognizes revenue when
it is earned and expenses when incurred, aligning income
with the period it relates to.
2. A company purchased equipment for $50,000. The
equipment has an estimated salvage value of $5,000 and a
useful life of 9 years. Using straight-line depreciation,
what is the annual depreciation expense?
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A. $4,500
B. $5,000
C. $5,000
D. $6,000
Rationale: Depreciation = (Cost − Salvage Value) /
Useful Life = ($50,000 − $5,000) ÷ 9 = $5,000.
3. If a company issues $100,000 of 10-year bonds at a
discount, which of the following occurs?
A. Cash received is greater than the face value of the bonds
B. Cash received equals the face value of the bonds
C. Cash received is less than the face value of the bonds
D. No cash is received; only interest is recorded
Rationale: Bonds issued at a discount are sold for less
than face value; the discount is amortized over the bond's
life.
4. Which financial statement provides information about a
company’s profitability over a specific period?
A. Balance Sheet
B. Income Statement
C. Statement of Cash Flows
D. Statement of Retained Earnings
Rationale: The income statement summarizes revenues
and expenses over a period, showing net income or loss.
5. A company has current assets of $200,000 and current
liabilities of $150,000. What is the current ratio?
A. 0.75
B. 1.25
C. 1.33
D. 1.50
Rationale: Current ratio = Current Assets ÷ Current
Liabilities = 200,000 ÷ 150,000 = 1.33.
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6. Which of the following is an example of a variable cost?
A. Depreciation
B. Rent
C. Insurance
D. Direct materials
Rationale: Variable costs change directly with production
volume; direct materials increase as production increases.
7. In managerial accounting, relevant costs are defined as:
A. Costs already incurred and unavoidable
B. Costs that will differ between alternatives
C. Total manufacturing costs
D. Standard costs
Rationale: Relevant costs affect decisions because they
differ among alternatives; sunk costs are irrelevant.
8. A company uses a periodic inventory system. Which of
the following is true?
A. Inventory is updated continuously
B. Cost of goods sold is recorded with each sale
C. Inventory and cost of goods sold are determined at
the end of the period
D. Inventory records are never adjusted
Rationale: In a periodic system, inventory is counted at
period-end, and COGS is calculated from beginning
inventory, purchases, and ending inventory.
9. Ethical financial reporting requires which of the following?
A. Aggressive revenue recognition to increase profits
B. Omitting liabilities to improve ratios
C. Reporting only favorable information
D. Accurate, complete, and unbiased financial
statements
Rationale: Professional standards require financial
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statements to be truthful and transparent, reflecting
actual performance.
10. Which of the following is NOT a component of the
accounting equation?
A. Assets
B. Liabilities
C. Revenues
D. Equity
Rationale: The accounting equation is Assets = Liabilities
+ Equity; revenues affect equity but are not a component.
11. Which of the following is NOT considered a current
asset?
A. Accounts Receivable
B. Cash
C. Equipment
D. Inventory
Rationale: Current assets are expected to be converted to
cash or used within one year; equipment is a long-term
asset.
12. Scenario: A company pays $12,000 for a one-year
insurance policy on January 1. At the end of March, how
much insurance expense should be recorded?
A. $12,000
B. $9,000
C. $3,000
D. $0
Rationale: Insurance expense = $12,000 × (3/12) =
WGU D196 OBJECTIVE ASSESSMENT
PRINCIPLES OF FINANCIAL &
MANAGERIAL ACCOUNTING ACTUAL
NEWEST EXAM | QUESTIONS AND
VERIFIED ANSWERS WITH RATIONALE |
RATED A +
1. Which of the following best describes the accrual basis of
accounting?
A. Revenue is recorded when cash is received, and
expenses are recorded when paid
B. Revenue is recorded when earned, and expenses are
recorded when incurred
C. Revenue is recorded only at the end of the fiscal year,
and expenses are deferred until payment
D. Revenue is recorded when earned, and expenses are
recorded when paid
Rationale: Accrual accounting recognizes revenue when
it is earned and expenses when incurred, aligning income
with the period it relates to.
2. A company purchased equipment for $50,000. The
equipment has an estimated salvage value of $5,000 and a
useful life of 9 years. Using straight-line depreciation,
what is the annual depreciation expense?
,2|Page
A. $4,500
B. $5,000
C. $5,000
D. $6,000
Rationale: Depreciation = (Cost − Salvage Value) /
Useful Life = ($50,000 − $5,000) ÷ 9 = $5,000.
3. If a company issues $100,000 of 10-year bonds at a
discount, which of the following occurs?
A. Cash received is greater than the face value of the bonds
B. Cash received equals the face value of the bonds
C. Cash received is less than the face value of the bonds
D. No cash is received; only interest is recorded
Rationale: Bonds issued at a discount are sold for less
than face value; the discount is amortized over the bond's
life.
4. Which financial statement provides information about a
company’s profitability over a specific period?
A. Balance Sheet
B. Income Statement
C. Statement of Cash Flows
D. Statement of Retained Earnings
Rationale: The income statement summarizes revenues
and expenses over a period, showing net income or loss.
5. A company has current assets of $200,000 and current
liabilities of $150,000. What is the current ratio?
A. 0.75
B. 1.25
C. 1.33
D. 1.50
Rationale: Current ratio = Current Assets ÷ Current
Liabilities = 200,000 ÷ 150,000 = 1.33.
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6. Which of the following is an example of a variable cost?
A. Depreciation
B. Rent
C. Insurance
D. Direct materials
Rationale: Variable costs change directly with production
volume; direct materials increase as production increases.
7. In managerial accounting, relevant costs are defined as:
A. Costs already incurred and unavoidable
B. Costs that will differ between alternatives
C. Total manufacturing costs
D. Standard costs
Rationale: Relevant costs affect decisions because they
differ among alternatives; sunk costs are irrelevant.
8. A company uses a periodic inventory system. Which of
the following is true?
A. Inventory is updated continuously
B. Cost of goods sold is recorded with each sale
C. Inventory and cost of goods sold are determined at
the end of the period
D. Inventory records are never adjusted
Rationale: In a periodic system, inventory is counted at
period-end, and COGS is calculated from beginning
inventory, purchases, and ending inventory.
9. Ethical financial reporting requires which of the following?
A. Aggressive revenue recognition to increase profits
B. Omitting liabilities to improve ratios
C. Reporting only favorable information
D. Accurate, complete, and unbiased financial
statements
Rationale: Professional standards require financial
, 4|Page
statements to be truthful and transparent, reflecting
actual performance.
10. Which of the following is NOT a component of the
accounting equation?
A. Assets
B. Liabilities
C. Revenues
D. Equity
Rationale: The accounting equation is Assets = Liabilities
+ Equity; revenues affect equity but are not a component.
11. Which of the following is NOT considered a current
asset?
A. Accounts Receivable
B. Cash
C. Equipment
D. Inventory
Rationale: Current assets are expected to be converted to
cash or used within one year; equipment is a long-term
asset.
12. Scenario: A company pays $12,000 for a one-year
insurance policy on January 1. At the end of March, how
much insurance expense should be recorded?
A. $12,000
B. $9,000
C. $3,000
D. $0
Rationale: Insurance expense = $12,000 × (3/12) =
