WGU D196 PRE-ASSESSMENT QUESTIONS AND CORRECT
ANSWERS
What is the effect of a company's accounting department maintaining high ethical
standards? - Answers - The company's accounting information will increase in value.
Why might employees be interested in their company's financial accounting
information? - Answers - Financial statement data are often used in determining
employee bonuses.
Which group establishes financial accounting rules in the United States? - Answers -
Financial Accounting Standards Board (FASB)
Which report is one of the three primary financial statements? - Answers - Statement of
cash flows
A company paid $5,000 cash in advertising costs.
How does this transaction affect the paying company's accounting equation? - Answers
- Assets decrease by $5,000; expenses increase by $5,000.
What is a transaction? - Answers - Two parties exchanging something of value
A company borrowed $80,000 cash from a bank.
How does this transaction affect the accounting equation of the borrowing company? -
Answers - Expenses decrease owners' equity.
What is the impact of expenses on the accounting equation? - Answers - Expenses
decrease owners' equity.
Which type of account are accounts payable and notes payable both examples of? -
Answers - Liability
What is the purpose of the financial accounting cycle? - Answers - To turn information
about transactions into financial statements
According to the accounting equation, the amount of liabilities and equity must always
be equal to another amount.
What is that other amount? - Answers - Assets
Which item is an expense item? - Answers - Cost of goods sold
How is gross profit computed? - Answers - Sales minus cost of goods sold
, Which type of account is retained earnings? - Answers - Equity
For purposes of cash flow classification in the statement of cash flows, which item is an
operating activity? - Answers - Paying employees
How does a classified balance sheet provide useful information to a decision maker? -
Answers - It distinguishes between current and long-term assets.
What information does a balance sheet provide to a decision maker? - Answers -
Summary of the financial position of a company at a particular date
What is an account payable? - Answers - The amount owed by a company that
purchased goods or services from a supplier on credit
What is an example of a financial cost that would result from poor direct labor budgeting
and planning? - Answers - Increased hiring, training, and overtime costs
What does a manager have control over in a cost center? - Answers - Costs
What should be considered when developing a measure to evaluate the performance of
a manager? - Answers - Only controllable costs
In some companies, the performance measures for profit center managers are heavily
influenced by cost allocations downward from organizational units (such as company
headquarters).
Why is this a mistake? - Answers - Uncontrollable costs should not be included in the
performance evaluation measure of a profit center manager.
Which budget should include the expected cost of supplies used by the office staff of
the corporate headquarters? - Answers - Administrative expense budget
Which items are uncontrollable, external variables that make it difficult to forecast the
level of sales? - Answers - Customer tastes and economic conditions
What is the correct sequence of budgets in a manufacturing business? - Answers -
Sales, production, direct materials
Which type of business organization has a major focus on direct materials, direct labor,
and overhead? - Answers - Manufacturing
What are the three primary functions that company managers use managerial
accounting information for? - Answers - Planning, controlling, and evaluating
What is the proper accounting for a product cost? - Answers - Record as an inventory
cost until the item is sold
ANSWERS
What is the effect of a company's accounting department maintaining high ethical
standards? - Answers - The company's accounting information will increase in value.
Why might employees be interested in their company's financial accounting
information? - Answers - Financial statement data are often used in determining
employee bonuses.
Which group establishes financial accounting rules in the United States? - Answers -
Financial Accounting Standards Board (FASB)
Which report is one of the three primary financial statements? - Answers - Statement of
cash flows
A company paid $5,000 cash in advertising costs.
How does this transaction affect the paying company's accounting equation? - Answers
- Assets decrease by $5,000; expenses increase by $5,000.
What is a transaction? - Answers - Two parties exchanging something of value
A company borrowed $80,000 cash from a bank.
How does this transaction affect the accounting equation of the borrowing company? -
Answers - Expenses decrease owners' equity.
What is the impact of expenses on the accounting equation? - Answers - Expenses
decrease owners' equity.
Which type of account are accounts payable and notes payable both examples of? -
Answers - Liability
What is the purpose of the financial accounting cycle? - Answers - To turn information
about transactions into financial statements
According to the accounting equation, the amount of liabilities and equity must always
be equal to another amount.
What is that other amount? - Answers - Assets
Which item is an expense item? - Answers - Cost of goods sold
How is gross profit computed? - Answers - Sales minus cost of goods sold
, Which type of account is retained earnings? - Answers - Equity
For purposes of cash flow classification in the statement of cash flows, which item is an
operating activity? - Answers - Paying employees
How does a classified balance sheet provide useful information to a decision maker? -
Answers - It distinguishes between current and long-term assets.
What information does a balance sheet provide to a decision maker? - Answers -
Summary of the financial position of a company at a particular date
What is an account payable? - Answers - The amount owed by a company that
purchased goods or services from a supplier on credit
What is an example of a financial cost that would result from poor direct labor budgeting
and planning? - Answers - Increased hiring, training, and overtime costs
What does a manager have control over in a cost center? - Answers - Costs
What should be considered when developing a measure to evaluate the performance of
a manager? - Answers - Only controllable costs
In some companies, the performance measures for profit center managers are heavily
influenced by cost allocations downward from organizational units (such as company
headquarters).
Why is this a mistake? - Answers - Uncontrollable costs should not be included in the
performance evaluation measure of a profit center manager.
Which budget should include the expected cost of supplies used by the office staff of
the corporate headquarters? - Answers - Administrative expense budget
Which items are uncontrollable, external variables that make it difficult to forecast the
level of sales? - Answers - Customer tastes and economic conditions
What is the correct sequence of budgets in a manufacturing business? - Answers -
Sales, production, direct materials
Which type of business organization has a major focus on direct materials, direct labor,
and overhead? - Answers - Manufacturing
What are the three primary functions that company managers use managerial
accounting information for? - Answers - Planning, controlling, and evaluating
What is the proper accounting for a product cost? - Answers - Record as an inventory
cost until the item is sold
