WGU C213 ACCOUNTING FOR
DECISION MAKERS FINAL EXAM
QUESTIONS AND ANSWERS
1. Which of the following describes the impact of purchasing inventory on credit under the
accrual basis of accounting?
A. Increase in Assets and Increase in Liabilities
B. Increase in Assets and Increase in Equity
C. Decrease in Assets and Increase in Liabilities
D. Decrease in Assets and Decrease in Equity
Answer: A
Conceptual Explanation: Purchasing inventory on credit increases the Asset account
(Inventory) and increases the Liability account (Accounts Payable).
2. In a period of rising prices, which inventory valuation method results in the highest Net
Income?
A. LIFO
B. Specific Identification
,C. Weighted Average Cost
D. FIFO
Answer: D
Conceptual Explanation: FIFO (First-In, First-Out) assigns the oldest, lower costs to COGS,
resulting in a higher Net Income when prices are rising.
3. Which financial statement reports a company’s financial position at a specific point in
time?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Statement of Retained Earnings
Answer: C
Conceptual Explanation: The Balance Sheet is a snapshot of assets, liabilities, and equity
at a specific date, unlike other statements that cover a period of time.
4. How is the ‘Gain on Sale of Equipment’ classified on the Statement of Cash Flows using the
indirect method?
A. Subtracted from Net Income in Operating Activities
B. Added to Net Income in Operating Activities
C. Reported as a Financing Activity
, D. Reported as an Investing Activity
Answer: A
Conceptual Explanation: Gains are non-cash increases to net income; therefore, they must
be subtracted from net income to reconcile to cash provided by operations.
5. What is the primary objective of the Sarbanes-Oxley Act (SOX)?
A. To standardize international tax rates
B. To reduce the complexity of financial reports
C. To increase the minimum wage for accountants
D. To enhance corporate responsibility and financial disclosures
Answer: D
Conceptual Explanation: SOX was enacted to prevent accounting fraud and improve the
reliability of financial statements for public companies.
6. A company has a Contribution Margin Ratio of 40%. If sales increase by $10,000, how much
will Net Operating Income increase?
A. $2,500
B. $6,000
C. $10,000
D. $4,000
DECISION MAKERS FINAL EXAM
QUESTIONS AND ANSWERS
1. Which of the following describes the impact of purchasing inventory on credit under the
accrual basis of accounting?
A. Increase in Assets and Increase in Liabilities
B. Increase in Assets and Increase in Equity
C. Decrease in Assets and Increase in Liabilities
D. Decrease in Assets and Decrease in Equity
Answer: A
Conceptual Explanation: Purchasing inventory on credit increases the Asset account
(Inventory) and increases the Liability account (Accounts Payable).
2. In a period of rising prices, which inventory valuation method results in the highest Net
Income?
A. LIFO
B. Specific Identification
,C. Weighted Average Cost
D. FIFO
Answer: D
Conceptual Explanation: FIFO (First-In, First-Out) assigns the oldest, lower costs to COGS,
resulting in a higher Net Income when prices are rising.
3. Which financial statement reports a company’s financial position at a specific point in
time?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Statement of Retained Earnings
Answer: C
Conceptual Explanation: The Balance Sheet is a snapshot of assets, liabilities, and equity
at a specific date, unlike other statements that cover a period of time.
4. How is the ‘Gain on Sale of Equipment’ classified on the Statement of Cash Flows using the
indirect method?
A. Subtracted from Net Income in Operating Activities
B. Added to Net Income in Operating Activities
C. Reported as a Financing Activity
, D. Reported as an Investing Activity
Answer: A
Conceptual Explanation: Gains are non-cash increases to net income; therefore, they must
be subtracted from net income to reconcile to cash provided by operations.
5. What is the primary objective of the Sarbanes-Oxley Act (SOX)?
A. To standardize international tax rates
B. To reduce the complexity of financial reports
C. To increase the minimum wage for accountants
D. To enhance corporate responsibility and financial disclosures
Answer: D
Conceptual Explanation: SOX was enacted to prevent accounting fraud and improve the
reliability of financial statements for public companies.
6. A company has a Contribution Margin Ratio of 40%. If sales increase by $10,000, how much
will Net Operating Income increase?
A. $2,500
B. $6,000
C. $10,000
D. $4,000
