WGU C213 ACCOUNTING FOR DECISION
MAKERS COMPREHENSIVE EXAMINATION
TEST WITH COMPLETE QUESTIONS AND
SOLUTIONS
◉ What two items of information are revealed on the balance sheet?
Answer: ownership and debt
◉ Which term is defined as the residual interest in the net assets of a
company? Answer: owner's equity
◉ A corporation has total liabilities of $300 million, total owners'
equity of $100 million, and current assets of $50 million.What is the
value of the firm's long-term assets? Answer: $350 million
◉ Which situation should result in revenue recognition on the income
statement for the year ending 12/31/14 if the firm is using accrual-
basis accounting? Answer: In 2014, a company provides services to a
customer for which cash will be collected the next year (2015).
◉ Which category on the statement of cash flows summarizes cash
receipts and payments to owners and creditors of the company?
Answer: Cash flows from financing activities
,◉ Where would an investor find a summary of a company's
significant accounting policies? Answer: In the notes to financial
statements
◉ Which assurance does an external audit report provide for its
readers? Answer: The company's financial statements fairly reflect its
financial position
◉ reliable Answer: information that can be verified
◉ relevant Answer: Information having to do with the matter at hand
◉ material Answer: Information that is important enough to make a
difference
◉ conservatism Answer: Information related to recognizing losses as
they occur
◉ Order the steps in the decision cycle from first (1) to last (5).
Answer: 1. prepare financial statement
2. analyze financial statement
3. gather info
4. make decision
5. implement decision
, ◉ Partial financial information for a company is as follows:
Current assets$36,543
Total assets$58,719
Current liabilities$24,824
Total liabilities$48,561
Stockholders' equity$10,158
Sales$46,997
Net Income$ 3,761
Market value of shares$41,316
What is the price-earnings (PE) ratio for this company? Answer: 11.0
◉ What does it mean if a company has a debt ratio of 101.5%?
Answer: The company has 1.5% more total liabilities than total assets.
◉ What is consistent with a continual decline in gross profit if the
firm's cost of goods sold remains the same? Answer: Continual
decrease in sales
◉ Which two cash flow adequacy ratios represent a cash cow?
Answer: $6,991 / $5,486
$5,220 / $1,875
◉ Which formula yields a cash times interest earned ratio of 11?
Answer: Cash before interest and taxes of $11,000 / cash paid for
interest of $1,000
MAKERS COMPREHENSIVE EXAMINATION
TEST WITH COMPLETE QUESTIONS AND
SOLUTIONS
◉ What two items of information are revealed on the balance sheet?
Answer: ownership and debt
◉ Which term is defined as the residual interest in the net assets of a
company? Answer: owner's equity
◉ A corporation has total liabilities of $300 million, total owners'
equity of $100 million, and current assets of $50 million.What is the
value of the firm's long-term assets? Answer: $350 million
◉ Which situation should result in revenue recognition on the income
statement for the year ending 12/31/14 if the firm is using accrual-
basis accounting? Answer: In 2014, a company provides services to a
customer for which cash will be collected the next year (2015).
◉ Which category on the statement of cash flows summarizes cash
receipts and payments to owners and creditors of the company?
Answer: Cash flows from financing activities
,◉ Where would an investor find a summary of a company's
significant accounting policies? Answer: In the notes to financial
statements
◉ Which assurance does an external audit report provide for its
readers? Answer: The company's financial statements fairly reflect its
financial position
◉ reliable Answer: information that can be verified
◉ relevant Answer: Information having to do with the matter at hand
◉ material Answer: Information that is important enough to make a
difference
◉ conservatism Answer: Information related to recognizing losses as
they occur
◉ Order the steps in the decision cycle from first (1) to last (5).
Answer: 1. prepare financial statement
2. analyze financial statement
3. gather info
4. make decision
5. implement decision
, ◉ Partial financial information for a company is as follows:
Current assets$36,543
Total assets$58,719
Current liabilities$24,824
Total liabilities$48,561
Stockholders' equity$10,158
Sales$46,997
Net Income$ 3,761
Market value of shares$41,316
What is the price-earnings (PE) ratio for this company? Answer: 11.0
◉ What does it mean if a company has a debt ratio of 101.5%?
Answer: The company has 1.5% more total liabilities than total assets.
◉ What is consistent with a continual decline in gross profit if the
firm's cost of goods sold remains the same? Answer: Continual
decrease in sales
◉ Which two cash flow adequacy ratios represent a cash cow?
Answer: $6,991 / $5,486
$5,220 / $1,875
◉ Which formula yields a cash times interest earned ratio of 11?
Answer: Cash before interest and taxes of $11,000 / cash paid for
interest of $1,000
