WGU C213 ACCOUNTING FOR
DECISION MAKERS COMPREHENSIVE
REVIEW QUESTIONS AND VERIFIED
ANSWERS | 100% CORRECT | GRADE A+
1. Which of the following best describes the primary objective of financial accounting?
A. To provide information to internal managers for day-to-day operations.
B. To calculate the exact market value of a company’s shares.
C. To provide useful information to external users for decision-making.
D. To ensure that all employees are following company policy.
Answer: C
Conceptual Explanation: Financial accounting focuses on providing information to
external users like investors and creditors, whereas managerial accounting focuses on
internal users.
2. Under the accrual basis of accounting, when is revenue recognized?
A. When cash is received from the customer.
B. When the purchase order is received.
C. At the end of the fiscal year for all contracts.
D. When the performance obligation is satisfied, regardless of cash timing.
,Answer: D
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned
(performance obligation satisfied), not necessarily when cash is received.
3. A company purchases equipment for $50,000. This transaction increases an asset and:
A. Increases a liability if paid in cash.
B. Decreases Net Income immediately.
C. Increases Retained Earnings.
D. Decreases another asset if paid in cash.
Answer: D
Conceptual Explanation: If paid in cash, the transaction is an exchange of assets:
Equipment (Asset) increases and Cash (Asset) decreases.
4. 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. Balance Sheet
D. Statement of Cash Flows
Answer: C
, Conceptual Explanation: The Balance Sheet is a snapshot of assets, liabilities, and equity
at a specific point in time, unlike the others which cover a period of time.
5. During a period of rising prices, which inventory method results in the highest Net Income?
A. LIFO (Last-In, First-Out)
B. Specific Identification
C. Weighted Average Cost
D. FIFO (First-In, First-Out)
Answer: D
Conceptual Explanation: FIFO uses the oldest (cheaper) costs for COGS, leading to a lower
COGS and higher Net Income when prices are rising.
6. What is the effect of recording depreciation expense on the financial statements?
A. Decreases Net Income and decreases Total Assets.
B. Decreases Net Income and increases Total Liabilities.
C. Increases Net Income and increases Total Assets.
D. Has no effect on the Balance Sheet.
Answer: A
Conceptual Explanation: Depreciation expense reduces Net Income, and the credit to
Accumulated Depreciation reduces the book value of Assets.
DECISION MAKERS COMPREHENSIVE
REVIEW QUESTIONS AND VERIFIED
ANSWERS | 100% CORRECT | GRADE A+
1. Which of the following best describes the primary objective of financial accounting?
A. To provide information to internal managers for day-to-day operations.
B. To calculate the exact market value of a company’s shares.
C. To provide useful information to external users for decision-making.
D. To ensure that all employees are following company policy.
Answer: C
Conceptual Explanation: Financial accounting focuses on providing information to
external users like investors and creditors, whereas managerial accounting focuses on
internal users.
2. Under the accrual basis of accounting, when is revenue recognized?
A. When cash is received from the customer.
B. When the purchase order is received.
C. At the end of the fiscal year for all contracts.
D. When the performance obligation is satisfied, regardless of cash timing.
,Answer: D
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned
(performance obligation satisfied), not necessarily when cash is received.
3. A company purchases equipment for $50,000. This transaction increases an asset and:
A. Increases a liability if paid in cash.
B. Decreases Net Income immediately.
C. Increases Retained Earnings.
D. Decreases another asset if paid in cash.
Answer: D
Conceptual Explanation: If paid in cash, the transaction is an exchange of assets:
Equipment (Asset) increases and Cash (Asset) decreases.
4. 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. Balance Sheet
D. Statement of Cash Flows
Answer: C
, Conceptual Explanation: The Balance Sheet is a snapshot of assets, liabilities, and equity
at a specific point in time, unlike the others which cover a period of time.
5. During a period of rising prices, which inventory method results in the highest Net Income?
A. LIFO (Last-In, First-Out)
B. Specific Identification
C. Weighted Average Cost
D. FIFO (First-In, First-Out)
Answer: D
Conceptual Explanation: FIFO uses the oldest (cheaper) costs for COGS, leading to a lower
COGS and higher Net Income when prices are rising.
6. What is the effect of recording depreciation expense on the financial statements?
A. Decreases Net Income and decreases Total Assets.
B. Decreases Net Income and increases Total Liabilities.
C. Increases Net Income and increases Total Assets.
D. Has no effect on the Balance Sheet.
Answer: A
Conceptual Explanation: Depreciation expense reduces Net Income, and the credit to
Accumulated Depreciation reduces the book value of Assets.
