WGU C213 ACCOUNTING FOR
DECISION MAKERS COMPREHENSIVE
EXAM QUESTIONS AND ANSWERS
1. Under the accrual basis of accounting, when should revenue be recognized?
A. When the performance obligation is satisfied
B. When the cash is received from the customer
C. When the contract is signed by both parties
D. At the end of the fiscal year
Answer: A
Conceptual Explanation: Accrual accounting requires revenue recognition when it is
earned, regardless of when cash is received.
2. Which of the following describes the effect of purchasing inventory on account?
A. Total assets decrease and total liabilities decrease
B. Total assets remain unchanged
C. Total assets increase and equity increases
,D. Total assets increase and total liabilities increase
E. This question requires 4 options
Answer: D
Conceptual Explanation: Purchasing inventory on account increases the asset ‘Inventory’
and increases the liability ‘Accounts Payable’.
3. If a company uses the FIFO method during a period of rising prices, which of the following
is true?
A. Net income will be higher than under LIFO
B. Ending Inventory will be lower than under LIFO
C. Cost of Goods Sold will be higher than under LIFO
D. Income tax expense will be lower than under LIFO
Answer: A
Conceptual Explanation: FIFO assigns older (cheaper) costs to COGS, resulting in higher
net income when prices are rising.
4. Which financial statement reports a company’s financial position at a specific point in
time?
A. Income Statement
B. Statement of Cash Flows
C. Statement of Retained Earnings
, D. Balance Sheet
Answer: D
Conceptual Explanation: The Balance Sheet provides a snapshot of assets, liabilities, and
equity as of a specific date.
5. What is the primary purpose of the Sarbanes-Oxley Act (SOX)?
A. To restore public trust in financial reporting and corporate governance
B. To reduce the tax burden on small businesses
C. To standardize international accounting principles
D. To eliminate the need for independent audits
Answer: A
Conceptual Explanation: SOX was enacted in response to accounting scandals to improve
corporate responsibility and financial disclosures.
6. In a manufacturing environment, which cost is considered a period cost?
A. Direct Materials
B. Administrative Salaries
C. Direct Labor
D. Factory Utilities
Answer: B
DECISION MAKERS COMPREHENSIVE
EXAM QUESTIONS AND ANSWERS
1. Under the accrual basis of accounting, when should revenue be recognized?
A. When the performance obligation is satisfied
B. When the cash is received from the customer
C. When the contract is signed by both parties
D. At the end of the fiscal year
Answer: A
Conceptual Explanation: Accrual accounting requires revenue recognition when it is
earned, regardless of when cash is received.
2. Which of the following describes the effect of purchasing inventory on account?
A. Total assets decrease and total liabilities decrease
B. Total assets remain unchanged
C. Total assets increase and equity increases
,D. Total assets increase and total liabilities increase
E. This question requires 4 options
Answer: D
Conceptual Explanation: Purchasing inventory on account increases the asset ‘Inventory’
and increases the liability ‘Accounts Payable’.
3. If a company uses the FIFO method during a period of rising prices, which of the following
is true?
A. Net income will be higher than under LIFO
B. Ending Inventory will be lower than under LIFO
C. Cost of Goods Sold will be higher than under LIFO
D. Income tax expense will be lower than under LIFO
Answer: A
Conceptual Explanation: FIFO assigns older (cheaper) costs to COGS, resulting in higher
net income when prices are rising.
4. Which financial statement reports a company’s financial position at a specific point in
time?
A. Income Statement
B. Statement of Cash Flows
C. Statement of Retained Earnings
, D. Balance Sheet
Answer: D
Conceptual Explanation: The Balance Sheet provides a snapshot of assets, liabilities, and
equity as of a specific date.
5. What is the primary purpose of the Sarbanes-Oxley Act (SOX)?
A. To restore public trust in financial reporting and corporate governance
B. To reduce the tax burden on small businesses
C. To standardize international accounting principles
D. To eliminate the need for independent audits
Answer: A
Conceptual Explanation: SOX was enacted in response to accounting scandals to improve
corporate responsibility and financial disclosures.
6. In a manufacturing environment, which cost is considered a period cost?
A. Direct Materials
B. Administrative Salaries
C. Direct Labor
D. Factory Utilities
Answer: B
