WGU C213 EXAM GUIDE: ACCOUNTING
FOR DECISION MAKERS (ADVANCED
LEVEL)
1. Under the accrual basis of accounting, when is revenue generally recognized?
A. When the performance obligation is satisfied
B. When cash is received from the customer
C. At the end of the fiscal year
D. When the order is placed by the customer
Answer: A
Conceptual Explanation: The revenue recognition principle states that revenue should be
recognized in the period in which the performance obligation is satisfied, regardless of
when cash is received.
2. Which of the following would be classified as an investing activity on the Statement of Cash
Flows?
A. Collection of accounts receivable
B. Payment of dividends to shareholders
,C. Sale of equipment used in operations
D. Issuance of long-term bonds
Answer: C
Conceptual Explanation: Investing activities include the purchase and sale of long-term
assets and other investments not included in cash equivalents.
3. If a company uses the LIFO inventory method during a period of rising prices, which of the
following is true compared to FIFO?
A. Ending inventory will be higher
B. Cost of goods sold will be lower
C. Net income will be lower
D. Income tax expense will be higher
Answer: C
Conceptual Explanation: In rising prices, LIFO assigns the most recent (higher) costs to
COGS, resulting in lower net income and lower taxes.
4. What is the primary purpose of the Sarbanes-Oxley Act (SOX)?
A. To reduce unethical corporate behavior and decrease the likelihood of future corporate
scandals
B. To standardize international accounting rules
C. To eliminate the need for independent auditors
, D. To provide insurance for bank deposits
Answer: A
Conceptual Explanation: SOX was enacted to improve corporate governance and financial
reporting, restoring investor confidence after major scandals.
5. Which ratio measures a company’s ability to pay its short-term obligations using its most
liquid assets (excluding inventory)?
A. Current Ratio
B. Quick (Acid-Test) Ratio
C. Debt-to-Equity Ratio
D. Inventory Turnover Ratio
Answer: B
Conceptual Explanation: The Quick Ratio excludes inventory and prepaid expenses,
focusing only on cash, marketable securities, and receivables.
6. In a CVP (Cost-Volume-Profit) analysis, what happens to the break-even point if variable
costs per unit increase while the selling price remains constant?
A. The break-even point decreases
B. The contribution margin increases
C. The break-even point remains unchanged
D. The break-even point increases
FOR DECISION MAKERS (ADVANCED
LEVEL)
1. Under the accrual basis of accounting, when is revenue generally recognized?
A. When the performance obligation is satisfied
B. When cash is received from the customer
C. At the end of the fiscal year
D. When the order is placed by the customer
Answer: A
Conceptual Explanation: The revenue recognition principle states that revenue should be
recognized in the period in which the performance obligation is satisfied, regardless of
when cash is received.
2. Which of the following would be classified as an investing activity on the Statement of Cash
Flows?
A. Collection of accounts receivable
B. Payment of dividends to shareholders
,C. Sale of equipment used in operations
D. Issuance of long-term bonds
Answer: C
Conceptual Explanation: Investing activities include the purchase and sale of long-term
assets and other investments not included in cash equivalents.
3. If a company uses the LIFO inventory method during a period of rising prices, which of the
following is true compared to FIFO?
A. Ending inventory will be higher
B. Cost of goods sold will be lower
C. Net income will be lower
D. Income tax expense will be higher
Answer: C
Conceptual Explanation: In rising prices, LIFO assigns the most recent (higher) costs to
COGS, resulting in lower net income and lower taxes.
4. What is the primary purpose of the Sarbanes-Oxley Act (SOX)?
A. To reduce unethical corporate behavior and decrease the likelihood of future corporate
scandals
B. To standardize international accounting rules
C. To eliminate the need for independent auditors
, D. To provide insurance for bank deposits
Answer: A
Conceptual Explanation: SOX was enacted to improve corporate governance and financial
reporting, restoring investor confidence after major scandals.
5. Which ratio measures a company’s ability to pay its short-term obligations using its most
liquid assets (excluding inventory)?
A. Current Ratio
B. Quick (Acid-Test) Ratio
C. Debt-to-Equity Ratio
D. Inventory Turnover Ratio
Answer: B
Conceptual Explanation: The Quick Ratio excludes inventory and prepaid expenses,
focusing only on cash, marketable securities, and receivables.
6. In a CVP (Cost-Volume-Profit) analysis, what happens to the break-even point if variable
costs per unit increase while the selling price remains constant?
A. The break-even point decreases
B. The contribution margin increases
C. The break-even point remains unchanged
D. The break-even point increases
