WGU C213 ACCOUNTING FOR
DECISION MAKERS COMPREHENSIVE
EXAM QUESTIONS AND VERIFIED
ANSWERS | 100% CORRECT | GRADE A+
1. A company purchases equipment for $50,000 using $10,000 cash and a $40,000 note
payable. How does this affect the accounting equation?
A. Assets increase by $50,000; Liabilities increase by $50,000
B. Assets increase by $50,000; Liabilities increase by $40,000; Equity increases by $10,000
C. Assets increase by $40,000; Liabilities increase by $40,000
D. Assets decrease by $10,000; Liabilities increase by $40,000
Answer: C
Conceptual Explanation: Equipment (Asset) increases by $50k, but Cash (Asset)
decreases by $10k, resulting in a net asset increase of $40k. This is balanced by a $40k
increase in Notes Payable (Liability).
2. Under the accrual basis of accounting, when is revenue generally recognized?
A. When the customer places the order
B. When cash is received from the customer
C. At the end of the fiscal year
,D. When the service is performed or the goods are delivered
Answer: D
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned,
regardless of when cash is exchanged. This usually occurs at the time of delivery or
performance.
3. Which financial statement reports the financial position of a company at a specific point in
time?
A. Income Statement
B. Statement of Retained Earnings
C. Statement of Cash Flows
D. Balance Sheet
Answer: D
Conceptual Explanation: The Balance Sheet is a ‘snapshot’ of a company’s assets,
liabilities, and equity at a specific date. Other statements cover a period of time.
4. If a company has a Current Ratio of 2.5, what does this indicate about its liquidity?
A. The company is unable to meet its short-term obligations.
B. The company has $2.50 in current assets for every $1.00 of current liabilities.
C. The company has $2.50 in net income for every $1.00 of sales.
D. The company turns over its inventory 2.5 times per year.
, Answer: B
Conceptual Explanation: The current ratio is calculated as Current Assets divided by
Current Liabilities. A ratio of 2.5 means assets exceed liabilities, suggesting good short-
term liquidity.
5. Which of the following is considered an ‘Investing Activity’ on the Statement of Cash
Flows?
A. Purchasing a new delivery truck
B. Paying dividends to shareholders
C. Issuing common stock for cash
D. Collecting cash from customers
Answer: A
Conceptual Explanation: Investing activities involve the purchase or sale of long-term
assets like property, plant, and equipment.
6. What is the primary purpose of the Sarbanes-Oxley (SOX) Act?
A. To mandate the use of IFRS instead of GAAP
B. To reduce the tax burden on small corporations
C. To enhance corporate responsibility and financial disclosures to prevent fraud
D. To eliminate the need for independent auditors
Answer: C
DECISION MAKERS COMPREHENSIVE
EXAM QUESTIONS AND VERIFIED
ANSWERS | 100% CORRECT | GRADE A+
1. A company purchases equipment for $50,000 using $10,000 cash and a $40,000 note
payable. How does this affect the accounting equation?
A. Assets increase by $50,000; Liabilities increase by $50,000
B. Assets increase by $50,000; Liabilities increase by $40,000; Equity increases by $10,000
C. Assets increase by $40,000; Liabilities increase by $40,000
D. Assets decrease by $10,000; Liabilities increase by $40,000
Answer: C
Conceptual Explanation: Equipment (Asset) increases by $50k, but Cash (Asset)
decreases by $10k, resulting in a net asset increase of $40k. This is balanced by a $40k
increase in Notes Payable (Liability).
2. Under the accrual basis of accounting, when is revenue generally recognized?
A. When the customer places the order
B. When cash is received from the customer
C. At the end of the fiscal year
,D. When the service is performed or the goods are delivered
Answer: D
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned,
regardless of when cash is exchanged. This usually occurs at the time of delivery or
performance.
3. Which financial statement reports the financial position of a company at a specific point in
time?
A. Income Statement
B. Statement of Retained Earnings
C. Statement of Cash Flows
D. Balance Sheet
Answer: D
Conceptual Explanation: The Balance Sheet is a ‘snapshot’ of a company’s assets,
liabilities, and equity at a specific date. Other statements cover a period of time.
4. If a company has a Current Ratio of 2.5, what does this indicate about its liquidity?
A. The company is unable to meet its short-term obligations.
B. The company has $2.50 in current assets for every $1.00 of current liabilities.
C. The company has $2.50 in net income for every $1.00 of sales.
D. The company turns over its inventory 2.5 times per year.
, Answer: B
Conceptual Explanation: The current ratio is calculated as Current Assets divided by
Current Liabilities. A ratio of 2.5 means assets exceed liabilities, suggesting good short-
term liquidity.
5. Which of the following is considered an ‘Investing Activity’ on the Statement of Cash
Flows?
A. Purchasing a new delivery truck
B. Paying dividends to shareholders
C. Issuing common stock for cash
D. Collecting cash from customers
Answer: A
Conceptual Explanation: Investing activities involve the purchase or sale of long-term
assets like property, plant, and equipment.
6. What is the primary purpose of the Sarbanes-Oxley (SOX) Act?
A. To mandate the use of IFRS instead of GAAP
B. To reduce the tax burden on small corporations
C. To enhance corporate responsibility and financial disclosures to prevent fraud
D. To eliminate the need for independent auditors
Answer: C
