WGU C213 ACCOUNTING FOR
DECISION MAKERS FINAL EXAM
QUESTIONS AND ANSWERS
1. Which accounting principle requires that expenses incurred to generate revenue be
recognized in the same period as the revenue?
A. Revenue Recognition Principle
B. Cost Principle
C. Matching Principle
D. Full Disclosure Principle
Answer: C
Conceptual Explanation: The matching principle dictates that efforts (expenses) be
matched with accomplishments (revenues) in the period they occur.
2. Under the indirect method of preparing the Statement of Cash Flows, how is an increase in
Accounts Receivable handled?
A. Added to Net Income in the Operating section
B. Reported as a cash outflow in the Financing section
,C. Reported as a cash inflow in the Investing section
D. Subtracted from Net Income in the Operating section
Answer: D
Conceptual Explanation: An increase in Accounts Receivable implies that revenue was
recognized but cash was not yet received, thus it must be subtracted from Net Income to
reach cash flow from operations.
3. Which of the following would result in a higher Net Income during a period of rising prices
(inflation)?
A. FIFO (First-in, First-out)
B. LIFO (Last-in, First-out)
C. Weighted Average Cost
D. Specific Identification
Answer: A
Conceptual Explanation: FIFO assigns the older, lower costs to the Cost of Goods Sold
during inflation, resulting in higher reported net income compared to LIFO.
4. Which financial statement provides a snapshot of a company’s financial position at a
specific point in time?
A. Income Statement
B. Balance Sheet
, C. Statement of Cash Flows
D. Statement of Retained Earnings
Answer: B
Conceptual Explanation: The Balance Sheet reports assets, liabilities, and equity at a
specific point in time, unlike the other statements which cover a period of time.
5. If a company issues a bond at a discount, how will the interest expense compare to the
cash interest paid?
A. Interest expense will be equal to the cash paid
B. Interest expense will be greater than the cash paid
C. Interest expense will be less than the cash paid
D. There is no relationship between interest expense and cash paid
Answer: B
Conceptual Explanation: When a bond is issued at a discount, the amortization of that
discount increases the interest expense above the actual cash interest paid to bondholders.
6. What is the impact on the accounting equation when a company pays a cash dividend that
was previously declared?
A. Decrease Assets and Decrease Equity
B. Increase Assets and Increase Liabilities
C. Decrease Assets and Decrease Liabilities
DECISION MAKERS FINAL EXAM
QUESTIONS AND ANSWERS
1. Which accounting principle requires that expenses incurred to generate revenue be
recognized in the same period as the revenue?
A. Revenue Recognition Principle
B. Cost Principle
C. Matching Principle
D. Full Disclosure Principle
Answer: C
Conceptual Explanation: The matching principle dictates that efforts (expenses) be
matched with accomplishments (revenues) in the period they occur.
2. Under the indirect method of preparing the Statement of Cash Flows, how is an increase in
Accounts Receivable handled?
A. Added to Net Income in the Operating section
B. Reported as a cash outflow in the Financing section
,C. Reported as a cash inflow in the Investing section
D. Subtracted from Net Income in the Operating section
Answer: D
Conceptual Explanation: An increase in Accounts Receivable implies that revenue was
recognized but cash was not yet received, thus it must be subtracted from Net Income to
reach cash flow from operations.
3. Which of the following would result in a higher Net Income during a period of rising prices
(inflation)?
A. FIFO (First-in, First-out)
B. LIFO (Last-in, First-out)
C. Weighted Average Cost
D. Specific Identification
Answer: A
Conceptual Explanation: FIFO assigns the older, lower costs to the Cost of Goods Sold
during inflation, resulting in higher reported net income compared to LIFO.
4. Which financial statement provides a snapshot of a company’s financial position at a
specific point in time?
A. Income Statement
B. Balance Sheet
, C. Statement of Cash Flows
D. Statement of Retained Earnings
Answer: B
Conceptual Explanation: The Balance Sheet reports assets, liabilities, and equity at a
specific point in time, unlike the other statements which cover a period of time.
5. If a company issues a bond at a discount, how will the interest expense compare to the
cash interest paid?
A. Interest expense will be equal to the cash paid
B. Interest expense will be greater than the cash paid
C. Interest expense will be less than the cash paid
D. There is no relationship between interest expense and cash paid
Answer: B
Conceptual Explanation: When a bond is issued at a discount, the amortization of that
discount increases the interest expense above the actual cash interest paid to bondholders.
6. What is the impact on the accounting equation when a company pays a cash dividend that
was previously declared?
A. Decrease Assets and Decrease Equity
B. Increase Assets and Increase Liabilities
C. Decrease Assets and Decrease Liabilities
