WGU C213 ACCOUNTING FOR
DECISION MAKERS - COMPREHENSIVE
EXAM QUESTIONS AND ANSWERS
1. Which of the following describes the effect on the accounting equation when a company
purchases equipment using a long-term note payable?
A. Assets increase and Liabilities increase
B. Assets increase and Equity increases
C. Assets decrease and Liabilities increase
D. Liabilities increase and Equity decreases
Answer: A
Conceptual Explanation: Purchasing equipment increases an asset account, while using a
note payable increases a liability account, keeping the equation A=L+E in balance.
2. Under the accrual basis of accounting, when is revenue generally 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 sent to the client
Answer: C
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned
(performance obligation satisfied), regardless of when cash is received.
3. Which financial statement reports a company’s financial position at a specific point in
time?
A. Balance Sheet
B. Statement of Retained Earnings
C. Income Statement
D. Statement of Cash Flows
Answer: A
Conceptual Explanation: The Balance Sheet provides a snapshot of assets, liabilities, and
equity at a specific date, unlike other statements which cover a period of time.
4. During a period of steadily rising prices, which inventory valuation method typically results
in the lowest net income?
A. FIFO (First-In, First-Out)
B. Specific Identification
C. Weighted Average Cost
D. LIFO (Last-In, First-Out)
, Answer: D
Conceptual Explanation: In inflationary periods, LIFO assigns the most recent, higher
costs to Cost of Goods Sold, which lowers taxable income and net income.
5. Which of the following is classified as an investing activity on the Statement of Cash Flows?
A. Payment of dividends to shareholders
B. Sale of used manufacturing machinery
C. Issuance of common stock
D. Collection of accounts receivable
Answer: B
Conceptual Explanation: Investing activities involve the purchase and sale of long-term
assets and investments. Dividends and stock issuance are financing activities.
6. What is the primary purpose of the Sarbanes-Oxley Act (SOX)?
A. To restore public trust in corporate financial reporting
B. To eliminate the need for external audits
C. To standardize international accounting rules
D. To reduce the tax burden on large corporations
Answer: A
DECISION MAKERS - COMPREHENSIVE
EXAM QUESTIONS AND ANSWERS
1. Which of the following describes the effect on the accounting equation when a company
purchases equipment using a long-term note payable?
A. Assets increase and Liabilities increase
B. Assets increase and Equity increases
C. Assets decrease and Liabilities increase
D. Liabilities increase and Equity decreases
Answer: A
Conceptual Explanation: Purchasing equipment increases an asset account, while using a
note payable increases a liability account, keeping the equation A=L+E in balance.
2. Under the accrual basis of accounting, when is revenue generally 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 sent to the client
Answer: C
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned
(performance obligation satisfied), regardless of when cash is received.
3. Which financial statement reports a company’s financial position at a specific point in
time?
A. Balance Sheet
B. Statement of Retained Earnings
C. Income Statement
D. Statement of Cash Flows
Answer: A
Conceptual Explanation: The Balance Sheet provides a snapshot of assets, liabilities, and
equity at a specific date, unlike other statements which cover a period of time.
4. During a period of steadily rising prices, which inventory valuation method typically results
in the lowest net income?
A. FIFO (First-In, First-Out)
B. Specific Identification
C. Weighted Average Cost
D. LIFO (Last-In, First-Out)
, Answer: D
Conceptual Explanation: In inflationary periods, LIFO assigns the most recent, higher
costs to Cost of Goods Sold, which lowers taxable income and net income.
5. Which of the following is classified as an investing activity on the Statement of Cash Flows?
A. Payment of dividends to shareholders
B. Sale of used manufacturing machinery
C. Issuance of common stock
D. Collection of accounts receivable
Answer: B
Conceptual Explanation: Investing activities involve the purchase and sale of long-term
assets and investments. Dividends and stock issuance are financing activities.
6. What is the primary purpose of the Sarbanes-Oxley Act (SOX)?
A. To restore public trust in corporate financial reporting
B. To eliminate the need for external audits
C. To standardize international accounting rules
D. To reduce the tax burden on large corporations
Answer: A
