WGU C213 ACCOUNTING FOR
DECISION MAKERS COMPREHENSIVE
EXAM QUESTIONS AND ANSWERS
1. Which financial statement provides information about a company’s financial position at a
specific point in time?
A. Balance Sheet
B. Statement of Cash Flows
C. Income Statement
D. Statement of Retained Earnings
Answer: A
Conceptual Explanation: The Balance Sheet reports assets, liabilities, and equity at a
specific point in time, unlike the others which report activity over a period.
2. Under the accrual basis of accounting, when is revenue generally recognized?
A. When cash is received
B. When the invoice is sent to the customer
C. When the performance obligation is satisfied
,D. At the end of the fiscal year
Answer: C
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned
(performance obligation satisfied), regardless of when cash is exchanged.
3. If a company uses the LIFO inventory method during a period of rising prices, which of the
following is true compared to FIFO?
A. Cost of Goods Sold (COGS) will be higher
B. Net income will be higher
C. Ending inventory will be higher
D. Income tax expense will be higher
Answer: A
Conceptual Explanation: LIFO assumes the last items purchased (the most expensive in
rising prices) are sold first, resulting in a higher COGS.
4. Which of the following would be classified as an operating activity on the Statement of
Cash Flows?
A. Payment of dividends to stockholders
B. Sale of equipment for cash
C. Issuance of common stock
D. Cash received from customers for services
, Answer: D
Conceptual Explanation: Operating activities involve the primary activities of the
business, such as generating revenue and paying for day-to-day expenses.
5. What is the primary purpose of the Sarbanes-Oxley Act (SOX)?
A. To standardize international tax laws
B. To reduce unethical corporate behavior and restore investor confidence
C. To eliminate the need for independent audits
D. To allow companies to keep internal controls private
Answer: B
Conceptual Explanation: SOX was enacted to improve corporate governance and financial
reporting accuracy following major accounting scandals.
6. In a manufacturing environment, which of the following is considered a ‘period cost’?
A. Direct materials
B. Direct labor
C. Factory utilities
D. Selling and administrative expenses
Answer: D
DECISION MAKERS COMPREHENSIVE
EXAM QUESTIONS AND ANSWERS
1. Which financial statement provides information about a company’s financial position at a
specific point in time?
A. Balance Sheet
B. Statement of Cash Flows
C. Income Statement
D. Statement of Retained Earnings
Answer: A
Conceptual Explanation: The Balance Sheet reports assets, liabilities, and equity at a
specific point in time, unlike the others which report activity over a period.
2. Under the accrual basis of accounting, when is revenue generally recognized?
A. When cash is received
B. When the invoice is sent to the customer
C. When the performance obligation is satisfied
,D. At the end of the fiscal year
Answer: C
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned
(performance obligation satisfied), regardless of when cash is exchanged.
3. If a company uses the LIFO inventory method during a period of rising prices, which of the
following is true compared to FIFO?
A. Cost of Goods Sold (COGS) will be higher
B. Net income will be higher
C. Ending inventory will be higher
D. Income tax expense will be higher
Answer: A
Conceptual Explanation: LIFO assumes the last items purchased (the most expensive in
rising prices) are sold first, resulting in a higher COGS.
4. Which of the following would be classified as an operating activity on the Statement of
Cash Flows?
A. Payment of dividends to stockholders
B. Sale of equipment for cash
C. Issuance of common stock
D. Cash received from customers for services
, Answer: D
Conceptual Explanation: Operating activities involve the primary activities of the
business, such as generating revenue and paying for day-to-day expenses.
5. What is the primary purpose of the Sarbanes-Oxley Act (SOX)?
A. To standardize international tax laws
B. To reduce unethical corporate behavior and restore investor confidence
C. To eliminate the need for independent audits
D. To allow companies to keep internal controls private
Answer: B
Conceptual Explanation: SOX was enacted to improve corporate governance and financial
reporting accuracy following major accounting scandals.
6. In a manufacturing environment, which of the following is considered a ‘period cost’?
A. Direct materials
B. Direct labor
C. Factory utilities
D. Selling and administrative expenses
Answer: D
