WGU C213 ACCOUNTING FOR
DECISION MAKERS OBJECT
ASSESSMENT QUESTIONS AND
ANSWERS
1. Under the accrual basis of accounting, when should revenue be recognized?
A. When cash is received from the customer
B. At the end of the fiscal year
C. When the performance obligation is satisfied
D. When the invoice is generated
Answer: C
Conceptual Explanation: Revenue recognition under GAAP requires that revenue be
recognized when the service or product is delivered (performance obligation satisfied),
regardless of cash timing.
2. In a period of rising prices, which inventory method typically results in the lowest net
income?
A. FIFO (First-In, First-Out)
,B. Weighted Average Cost
C. LIFO (Last-In, First-Out)
D. Specific Identification
Answer: C
Conceptual Explanation: LIFO assigns the most recent (higher) costs to Cost of Goods
Sold, resulting in higher expenses and lower net income during inflation.
3. How is Treasury Stock reported on the Balance Sheet?
A. As a Long-term Asset
B. As an addition to Paid-in Capital
C. As a Current Liability
D. As a reduction of Stockholders’ Equity
Answer: D
Conceptual Explanation: Treasury stock represents shares repurchased by the company
and is a contra-equity account, reducing total stockholders’ equity.
4. Which of the following activities is classified as an Investing Activity on the Statement of
Cash Flows?
A. Payment of dividends to shareholders
B. Collection of accounts receivable
, C. Issuance of common stock
D. Sale of used office equipment
Answer: D
Conceptual Explanation: Investing activities involve the purchase and sale of long-term
assets and investments. Sale of equipment fits this category.
5. What happens to fixed cost per unit as the level of activity increases?
A. It increases proportionally
B. It remains constant
C. It decreases
D. It increases at a decreasing rate
Answer: C
Conceptual Explanation: Total fixed costs remain constant, so as activity volume
increases, the fixed cost is spread over more units, reducing the cost per unit.
6. Which ratio measures a company’s ability to pay its short-term obligations using only its
most liquid assets?
A. Current Ratio
B. Acid-test (Quick) Ratio
C. Debt-to-Equity Ratio
DECISION MAKERS OBJECT
ASSESSMENT QUESTIONS AND
ANSWERS
1. Under the accrual basis of accounting, when should revenue be recognized?
A. When cash is received from the customer
B. At the end of the fiscal year
C. When the performance obligation is satisfied
D. When the invoice is generated
Answer: C
Conceptual Explanation: Revenue recognition under GAAP requires that revenue be
recognized when the service or product is delivered (performance obligation satisfied),
regardless of cash timing.
2. In a period of rising prices, which inventory method typically results in the lowest net
income?
A. FIFO (First-In, First-Out)
,B. Weighted Average Cost
C. LIFO (Last-In, First-Out)
D. Specific Identification
Answer: C
Conceptual Explanation: LIFO assigns the most recent (higher) costs to Cost of Goods
Sold, resulting in higher expenses and lower net income during inflation.
3. How is Treasury Stock reported on the Balance Sheet?
A. As a Long-term Asset
B. As an addition to Paid-in Capital
C. As a Current Liability
D. As a reduction of Stockholders’ Equity
Answer: D
Conceptual Explanation: Treasury stock represents shares repurchased by the company
and is a contra-equity account, reducing total stockholders’ equity.
4. Which of the following activities is classified as an Investing Activity on the Statement of
Cash Flows?
A. Payment of dividends to shareholders
B. Collection of accounts receivable
, C. Issuance of common stock
D. Sale of used office equipment
Answer: D
Conceptual Explanation: Investing activities involve the purchase and sale of long-term
assets and investments. Sale of equipment fits this category.
5. What happens to fixed cost per unit as the level of activity increases?
A. It increases proportionally
B. It remains constant
C. It decreases
D. It increases at a decreasing rate
Answer: C
Conceptual Explanation: Total fixed costs remain constant, so as activity volume
increases, the fixed cost is spread over more units, reducing the cost per unit.
6. Which ratio measures a company’s ability to pay its short-term obligations using only its
most liquid assets?
A. Current Ratio
B. Acid-test (Quick) Ratio
C. Debt-to-Equity Ratio
