WGU C213 Accounting for Decision Makers
Pre-Assessment V2 Official Practice Exam
Actual Exam 2026/2027 with Detailed
Rationales | Complete Exam-Style Questions |
Pass Guaranteed – A+ Graded
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SECTION 1: FINANCIAL ACCOUNTING & REPORTING Q1 – Q10
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Question 1 of 50
pex Consulting pays $12,000 on December 1 for a one-year insurance policy, recording it as a
A
prepaid asset. On December 31, the end of the fiscal year, determine the adjusting entry
required under accrual accounting principles.
. Recognize $1,000 of insurance expense and reduce prepaid insurance by $1,000 ✓
A
CORRECT
B. Recognize $12,000 of insurance expense and reduce prepaid insurance by $12,000
C. Recognize $1,000 of prepaid insurance and increase insurance expense by $1,000
D. Recognize $11,000 of insurance expense and reduce prepaid insurance by $11,000
orrect Answer: A
C
Rationale: The matching principle requires expenses to be recognized in the period they help
generate revenue, meaning one month of the prepaid policy has expired. A common trap is to
expense the entire payment immediately, which violates the accrual basis by ignoring the
asset's future economic benefit. Always calculate the exact portion of time elapsed when
adjusting prepaid accounts.
Question 2 of 50
innacle Construction signs a contract to build a warehouse for $2,000,000 with an estimated
P
total cost of $1,500,000. During the current year, Pinnacle incurs $600,000 in costs and bills the
client $800,000. Assuming the project meets the criteria for revenue recognition over time under
ASC 606, calculate the revenue recognized in the current year.
A. $800,000
, . $600,000
B
C. $1,000,000
D. $800,000 ✓ CORRECT
orrect Answer: D
C
Rationale: Under ASC 606, revenue recognized over time is based on the percentage of
completion, calculated as costs incurred divided by total estimated costs (40%), multiplied by
the total transaction price, resulting in $800,000. A frequent error is recognizing revenue equal
to the costs incurred, which defers all profit and misrepresents the performance obligation.
Ensure you apply the overall profit margin to the completed percentage rather than just
recovering costs.
Question 3 of 50
rion Manufacturing purchases machinery for $100,000 with a useful life of 5 years and a
O
residual value of $10,000. Determine the depreciation expense for year 1 using the
double-declining balance method.
. $36,000
A
B. $20,000
C. $40,000 ✓ CORRECT
D. $18,000
orrect Answer: C
C
Rationale: The double-declining balance method applies twice the straight-line rate (40%) to the
asset's beginning book value, ignoring residual value in the initial calculation, resulting in
$40,000 for the first year. The most tempting wrong answer subtracts the residual value before
applying the rate, which is a characteristic of the straight-line and units-of-production methods
but not DDB. Remember that residual value is only a floor for book value in DDB; it is not
subtracted from the cost upfront.
Question 4 of 50
uring a period of rising inventory costs, Horizon Electronics evaluates its inventory costing
D
methods. Identify the impact of using LIFO compared to FIFO on the company's financial
statements.
. LIFO results in a higher ending inventory value on the balance sheet
A
B. LIFO results in a lower cost of goods sold on the income statement
C. LIFO results in a lower net income on the income statement ✓ CORRECT
D. LIFO results in a higher total asset value on the balance sheet
Correct Answer: C
, ationale: In a period of rising costs, LIFO assigns the most recent, higher purchase prices to
R
cost of goods sold, thereby reducing gross profit and net income compared to FIFO. The most
tempting wrong answer reverses the effect on the balance sheet, as LIFO actually results in a
lower ending inventory value because older, cheaper costs remain in inventory. When analyzing
inventory methods, trace the physical flow of costs to determine which layer is expensed and
which remains on the balance sheet.
Question 5 of 50
elestial Corp. uses the allowance method for bad debts and estimates uncollectible accounts
C
at 3% of ending accounts receivable. At year-end, accounts receivable is $200,000, and the
allowance for doubtful accounts has a $1,000 credit balance before adjustment. Determine the
bad debt expense for the year.
. $5,000 ✓ CORRECT
A
B. $6,000
C. $7,000
D. $4,000
orrect Answer: A
C
Rationale: The balance sheet approach requires the allowance account to reflect 3% of
accounts receivable ($6,000), meaning the existing $1,000 credit balance must be augmented
by a $5,000 bad debt expense. A common trap is to ignore the existing $1,000 credit balance
and record the full $6,000 as the expense, which overstates the current period's cost. Always
check the prior balance in the allowance account before calculating the adjusting entry.
Question 6 of 50
enith Industries issues a $500,000, 5-year, 8% bond at a time when the market rate is 6%.
Z
Determine the impact of the bond issuance on Zenith's financial statements.
. The bond is issued at a discount, increasing total liabilities
A
B. The bond is issued at a premium, and the carrying value decreases over time ✓ CORRECT
C. The bond is issued at a discount, and interest expense exceeds cash interest paid
D. The bond is issued at a premium, and interest expense exceeds cash interest paid
orrect Answer: B
C
Rationale: When the stated rate is higher than the market rate, the bond is issued at a premium,
and the carrying value is amortized downward to face value over the bond's life. A common trap
is stating that interest expense exceeds cash interest paid, which is true for discounts but not
premiums; under a premium, cash interest exceeds interest expense. Visualize the amortization
schedule: premiums shrink the carrying value, while discounts grow it.
Question 7 of 50
Pre-Assessment V2 Official Practice Exam
Actual Exam 2026/2027 with Detailed
Rationales | Complete Exam-Style Questions |
Pass Guaranteed – A+ Graded
═════════════════════════════════════
═
SECTION 1: FINANCIAL ACCOUNTING & REPORTING Q1 – Q10
══════════════════════════════════════
Question 1 of 50
pex Consulting pays $12,000 on December 1 for a one-year insurance policy, recording it as a
A
prepaid asset. On December 31, the end of the fiscal year, determine the adjusting entry
required under accrual accounting principles.
. Recognize $1,000 of insurance expense and reduce prepaid insurance by $1,000 ✓
A
CORRECT
B. Recognize $12,000 of insurance expense and reduce prepaid insurance by $12,000
C. Recognize $1,000 of prepaid insurance and increase insurance expense by $1,000
D. Recognize $11,000 of insurance expense and reduce prepaid insurance by $11,000
orrect Answer: A
C
Rationale: The matching principle requires expenses to be recognized in the period they help
generate revenue, meaning one month of the prepaid policy has expired. A common trap is to
expense the entire payment immediately, which violates the accrual basis by ignoring the
asset's future economic benefit. Always calculate the exact portion of time elapsed when
adjusting prepaid accounts.
Question 2 of 50
innacle Construction signs a contract to build a warehouse for $2,000,000 with an estimated
P
total cost of $1,500,000. During the current year, Pinnacle incurs $600,000 in costs and bills the
client $800,000. Assuming the project meets the criteria for revenue recognition over time under
ASC 606, calculate the revenue recognized in the current year.
A. $800,000
, . $600,000
B
C. $1,000,000
D. $800,000 ✓ CORRECT
orrect Answer: D
C
Rationale: Under ASC 606, revenue recognized over time is based on the percentage of
completion, calculated as costs incurred divided by total estimated costs (40%), multiplied by
the total transaction price, resulting in $800,000. A frequent error is recognizing revenue equal
to the costs incurred, which defers all profit and misrepresents the performance obligation.
Ensure you apply the overall profit margin to the completed percentage rather than just
recovering costs.
Question 3 of 50
rion Manufacturing purchases machinery for $100,000 with a useful life of 5 years and a
O
residual value of $10,000. Determine the depreciation expense for year 1 using the
double-declining balance method.
. $36,000
A
B. $20,000
C. $40,000 ✓ CORRECT
D. $18,000
orrect Answer: C
C
Rationale: The double-declining balance method applies twice the straight-line rate (40%) to the
asset's beginning book value, ignoring residual value in the initial calculation, resulting in
$40,000 for the first year. The most tempting wrong answer subtracts the residual value before
applying the rate, which is a characteristic of the straight-line and units-of-production methods
but not DDB. Remember that residual value is only a floor for book value in DDB; it is not
subtracted from the cost upfront.
Question 4 of 50
uring a period of rising inventory costs, Horizon Electronics evaluates its inventory costing
D
methods. Identify the impact of using LIFO compared to FIFO on the company's financial
statements.
. LIFO results in a higher ending inventory value on the balance sheet
A
B. LIFO results in a lower cost of goods sold on the income statement
C. LIFO results in a lower net income on the income statement ✓ CORRECT
D. LIFO results in a higher total asset value on the balance sheet
Correct Answer: C
, ationale: In a period of rising costs, LIFO assigns the most recent, higher purchase prices to
R
cost of goods sold, thereby reducing gross profit and net income compared to FIFO. The most
tempting wrong answer reverses the effect on the balance sheet, as LIFO actually results in a
lower ending inventory value because older, cheaper costs remain in inventory. When analyzing
inventory methods, trace the physical flow of costs to determine which layer is expensed and
which remains on the balance sheet.
Question 5 of 50
elestial Corp. uses the allowance method for bad debts and estimates uncollectible accounts
C
at 3% of ending accounts receivable. At year-end, accounts receivable is $200,000, and the
allowance for doubtful accounts has a $1,000 credit balance before adjustment. Determine the
bad debt expense for the year.
. $5,000 ✓ CORRECT
A
B. $6,000
C. $7,000
D. $4,000
orrect Answer: A
C
Rationale: The balance sheet approach requires the allowance account to reflect 3% of
accounts receivable ($6,000), meaning the existing $1,000 credit balance must be augmented
by a $5,000 bad debt expense. A common trap is to ignore the existing $1,000 credit balance
and record the full $6,000 as the expense, which overstates the current period's cost. Always
check the prior balance in the allowance account before calculating the adjusting entry.
Question 6 of 50
enith Industries issues a $500,000, 5-year, 8% bond at a time when the market rate is 6%.
Z
Determine the impact of the bond issuance on Zenith's financial statements.
. The bond is issued at a discount, increasing total liabilities
A
B. The bond is issued at a premium, and the carrying value decreases over time ✓ CORRECT
C. The bond is issued at a discount, and interest expense exceeds cash interest paid
D. The bond is issued at a premium, and interest expense exceeds cash interest paid
orrect Answer: B
C
Rationale: When the stated rate is higher than the market rate, the bond is issued at a premium,
and the carrying value is amortized downward to face value over the bond's life. A common trap
is stating that interest expense exceeds cash interest paid, which is true for discounts but not
premiums; under a premium, cash interest exceeds interest expense. Visualize the amortization
schedule: premiums shrink the carrying value, while discounts grow it.
Question 7 of 50
