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WGU C213 FINAL EXAM ACTUAL 2026/2027 | Accounting
for Decision Makers | Verified Answers | Pass Guaranteed -
A+ Graded
Section 1: Financial Accounting Foundations & Statement Preparation (Q1-16)
Q1. A company provides services to a client on December 28, Year 1, and bills the
client $5,000 with payment due in January, Year 2. Under accrual accounting, the
company should record:
A. No entry until cash is received in January B. A debit to Accounts Receivable and
credit to Service Revenue on December 28, Year 1 C. A debit to Cash and credit to
Unearned Revenue on December 28, Year 1 D. A debit to Prepaid Expense and credit
to Service Revenue on December 28, Year 1
B. A debit to Accounts Receivable and credit to Service Revenue on December 28,
Year 1 [CORRECT]
Rationale: Under accrual accounting, revenue is recognized when earned (services
performed), regardless of cash receipt; this creates an asset (Accounts Receivable)
and recognizes revenue in the correct period. Cash basis (A) violates GAAP, and
unearned revenue (C) applies when cash is received before services are rendered.
Correct Answer: B
Q2. A company pays $12,000 on September 1 for a 12-month insurance policy. The
adjusting entry on December 31 (4 months later) should include:
A. Debit Insurance Expense $12,000; Credit Prepaid Insurance $12,000 B. Debit
Insurance Expense $4,000; Credit Prepaid Insurance $4,000 C. Debit Prepaid
Insurance $8,000; Credit Insurance Expense $8,000 D. Debit Insurance Expense
$8,000; Credit Prepaid Insurance $8,000
B. Debit Insurance Expense $4,000; Credit Prepaid Insurance $4,000 [CORRECT]
Rationale: Monthly insurance expense = $12,000 ÷ 12 = $1,000/month; for 4 months
(Sep-Dec), $4,000 of insurance has expired and must be recognized as expense,
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leaving $8,000 as Prepaid Insurance. Debiting $12,000 (A) would expense the entire
policy, and $8,000 (D) would reverse the remaining prepaid amount.
Correct Answer: B
Q3. A company has the following account balances before adjustments: Supplies
$3,200 (debit), Unearned Revenue $1,800 (credit). A physical count shows $800 of
supplies remaining, and $600 of the unearned revenue has been earned. The total
effect of these adjustments on net income is:
A. Increase of $2,000 B. Decrease of $2,000 C. Increase of $2,400 D. Decrease of
$2,400
B. Decrease of $2,000 [CORRECT]
Rationale: Supplies adjustment: $3,200 - $800 = $2,400 Supplies Expense (decreases
net income); Unearned Revenue adjustment: $600 earned increases Service Revenue
(increases net income). Net effect: -$2,400 + $600 = -$1,800 decrease.
Correct Answer: B
Q4. A company purchased equipment for $50,000 with an estimated useful life of 5
years and no salvage value. Using straight-line depreciation, the book value at the
end of Year 3 is:
A. $30,000 B. $20,000 C. $10,000 D. $40,000
B. $20,000 [CORRECT]
Rationale: Annual depreciation = ($50,000 - $0) ÷ 5 = $10,000/year; accumulated
depreciation after 3 years = $30,000; book value = $50,000 - $30,000 = $20,000.
$30,000 (A) is accumulated depreciation, $10,000 (C) is Year 5 book value, and
$40,000 (D) is Year 1 book value.
Correct Answer: B
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Q5. The closing process in the accounting cycle involves which of the following?
A. Transferring asset and liability balances to Retained Earnings B. Transferring
revenue, expense, and dividend balances to Retained Earnings through the Income
Summary account C. Recording adjusting entries for prepaid and accrued items D.
Preparing the post-closing trial balance from the adjusted trial balance
B. Transferring revenue, expense, and dividend balances to Retained Earnings
through the Income Summary account [CORRECT]
Rationale: Closing entries zero out temporary accounts (revenues, expenses,
dividends) and transfer their balances to Retained Earnings via the Income Summary
account; this resets temporary accounts for the next period. Assets and liabilities (A)
are permanent accounts and are not closed, and adjusting entries (C) precede closing
entries.
Correct Answer: B
Q6. A company reports net income of $85,000 for the year. Beginning retained
earnings were $120,000, and dividends declared were $25,000. The ending retained
earnings balance is:
A. $180,000 B. $210,000 C. $105,000 D. $230,000
A. $180,000 [CORRECT]
Rationale: Ending Retained Earnings = Beginning RE + Net Income - Dividends =
$120,000 + $85,000 - $25,000 = $180,000. $210,000 (B) adds dividends instead of
subtracting, $105,000 (C) subtracts net income, and $230,000 (D) adds both
incorrectly.
Correct Answer: A
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Q7. Which of the following transactions would be classified as a financing activity in
the statement of cash flows?
A. Purchase of equipment for $25,000 cash B. Issuance of common stock for $50,000
cash C. Collection of accounts receivable from customers D. Payment of salaries to
employees
B. Issuance of common stock for $50,000 cash [CORRECT]
Rationale: Financing activities include transactions with owners (issuance of stock,
dividends) and creditors (borrowing, repayment of debt); issuance of common stock
is a financing inflow. Equipment purchase (A) is investing, and collections (C) and
salary payments (D) are operating activities.
Correct Answer: B
Q8. A company reports net income of $60,000. Depreciation expense was $15,000,
accounts receivable increased by $8,000, and accounts payable decreased by $5,000.
Using the indirect method, cash flow from operating activities is:
A. $78,000 B. $62,000 C. $58,000 D. $48,000
B. $62,000 [CORRECT]
Rationale: CFO (indirect) = Net Income + Non-cash expenses - Increase in AR -
Decrease in AP = $60,000 + $15,000 - $8,000 - $5,000 = $62,000. Increases in current
assets are subtracted, decreases in current liabilities are subtracted, and non-cash
expenses are added back.
Correct Answer: B
Q9. A company sold equipment with a book value of $12,000 for $15,000 cash. The
original cost was $30,000. In the statement of cash flows, this transaction would be
reported as:
WGU C213 FINAL EXAM ACTUAL 2026/2027 | Accounting
for Decision Makers | Verified Answers | Pass Guaranteed -
A+ Graded
Section 1: Financial Accounting Foundations & Statement Preparation (Q1-16)
Q1. A company provides services to a client on December 28, Year 1, and bills the
client $5,000 with payment due in January, Year 2. Under accrual accounting, the
company should record:
A. No entry until cash is received in January B. A debit to Accounts Receivable and
credit to Service Revenue on December 28, Year 1 C. A debit to Cash and credit to
Unearned Revenue on December 28, Year 1 D. A debit to Prepaid Expense and credit
to Service Revenue on December 28, Year 1
B. A debit to Accounts Receivable and credit to Service Revenue on December 28,
Year 1 [CORRECT]
Rationale: Under accrual accounting, revenue is recognized when earned (services
performed), regardless of cash receipt; this creates an asset (Accounts Receivable)
and recognizes revenue in the correct period. Cash basis (A) violates GAAP, and
unearned revenue (C) applies when cash is received before services are rendered.
Correct Answer: B
Q2. A company pays $12,000 on September 1 for a 12-month insurance policy. The
adjusting entry on December 31 (4 months later) should include:
A. Debit Insurance Expense $12,000; Credit Prepaid Insurance $12,000 B. Debit
Insurance Expense $4,000; Credit Prepaid Insurance $4,000 C. Debit Prepaid
Insurance $8,000; Credit Insurance Expense $8,000 D. Debit Insurance Expense
$8,000; Credit Prepaid Insurance $8,000
B. Debit Insurance Expense $4,000; Credit Prepaid Insurance $4,000 [CORRECT]
Rationale: Monthly insurance expense = $12,000 ÷ 12 = $1,000/month; for 4 months
(Sep-Dec), $4,000 of insurance has expired and must be recognized as expense,
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leaving $8,000 as Prepaid Insurance. Debiting $12,000 (A) would expense the entire
policy, and $8,000 (D) would reverse the remaining prepaid amount.
Correct Answer: B
Q3. A company has the following account balances before adjustments: Supplies
$3,200 (debit), Unearned Revenue $1,800 (credit). A physical count shows $800 of
supplies remaining, and $600 of the unearned revenue has been earned. The total
effect of these adjustments on net income is:
A. Increase of $2,000 B. Decrease of $2,000 C. Increase of $2,400 D. Decrease of
$2,400
B. Decrease of $2,000 [CORRECT]
Rationale: Supplies adjustment: $3,200 - $800 = $2,400 Supplies Expense (decreases
net income); Unearned Revenue adjustment: $600 earned increases Service Revenue
(increases net income). Net effect: -$2,400 + $600 = -$1,800 decrease.
Correct Answer: B
Q4. A company purchased equipment for $50,000 with an estimated useful life of 5
years and no salvage value. Using straight-line depreciation, the book value at the
end of Year 3 is:
A. $30,000 B. $20,000 C. $10,000 D. $40,000
B. $20,000 [CORRECT]
Rationale: Annual depreciation = ($50,000 - $0) ÷ 5 = $10,000/year; accumulated
depreciation after 3 years = $30,000; book value = $50,000 - $30,000 = $20,000.
$30,000 (A) is accumulated depreciation, $10,000 (C) is Year 5 book value, and
$40,000 (D) is Year 1 book value.
Correct Answer: B
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Q5. The closing process in the accounting cycle involves which of the following?
A. Transferring asset and liability balances to Retained Earnings B. Transferring
revenue, expense, and dividend balances to Retained Earnings through the Income
Summary account C. Recording adjusting entries for prepaid and accrued items D.
Preparing the post-closing trial balance from the adjusted trial balance
B. Transferring revenue, expense, and dividend balances to Retained Earnings
through the Income Summary account [CORRECT]
Rationale: Closing entries zero out temporary accounts (revenues, expenses,
dividends) and transfer their balances to Retained Earnings via the Income Summary
account; this resets temporary accounts for the next period. Assets and liabilities (A)
are permanent accounts and are not closed, and adjusting entries (C) precede closing
entries.
Correct Answer: B
Q6. A company reports net income of $85,000 for the year. Beginning retained
earnings were $120,000, and dividends declared were $25,000. The ending retained
earnings balance is:
A. $180,000 B. $210,000 C. $105,000 D. $230,000
A. $180,000 [CORRECT]
Rationale: Ending Retained Earnings = Beginning RE + Net Income - Dividends =
$120,000 + $85,000 - $25,000 = $180,000. $210,000 (B) adds dividends instead of
subtracting, $105,000 (C) subtracts net income, and $230,000 (D) adds both
incorrectly.
Correct Answer: A
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Q7. Which of the following transactions would be classified as a financing activity in
the statement of cash flows?
A. Purchase of equipment for $25,000 cash B. Issuance of common stock for $50,000
cash C. Collection of accounts receivable from customers D. Payment of salaries to
employees
B. Issuance of common stock for $50,000 cash [CORRECT]
Rationale: Financing activities include transactions with owners (issuance of stock,
dividends) and creditors (borrowing, repayment of debt); issuance of common stock
is a financing inflow. Equipment purchase (A) is investing, and collections (C) and
salary payments (D) are operating activities.
Correct Answer: B
Q8. A company reports net income of $60,000. Depreciation expense was $15,000,
accounts receivable increased by $8,000, and accounts payable decreased by $5,000.
Using the indirect method, cash flow from operating activities is:
A. $78,000 B. $62,000 C. $58,000 D. $48,000
B. $62,000 [CORRECT]
Rationale: CFO (indirect) = Net Income + Non-cash expenses - Increase in AR -
Decrease in AP = $60,000 + $15,000 - $8,000 - $5,000 = $62,000. Increases in current
assets are subtracted, decreases in current liabilities are subtracted, and non-cash
expenses are added back.
Correct Answer: B
Q9. A company sold equipment with a book value of $12,000 for $15,000 cash. The
original cost was $30,000. In the statement of cash flows, this transaction would be
reported as:
