WGU C213 ACCOUNTING FOR
DECISION MAKERS FINAL PRACTICE
EXAM QUESTIONS AND VERIFIED
ANSWERS | 100% CORRECT | GRADE A+
1. A company reports a net income of $50,000. During the year, accounts receivable increased
by $10,000, and accounts payable decreased by $5,000. Using the indirect method, what is
the net cash flow from operating activities?
A. $65,000
B. $45,000
C. $55,000
D. $35,000
Answer: D
Conceptual Explanation: Starting with net income ($50,000), an increase in assets (AR) is
a deduction (-$10,000), and a decrease in liabilities (AP) is also a deduction (-$5,000),
resulting in $35,000.
2. Under the accrual basis of accounting, when should revenue be recognized?
A. When the cash is received from the customer
B. At the end of the fiscal year
,C. When the contract is signed by both parties
D. When the performance obligation is satisfied
Answer: D
Conceptual Explanation: The revenue recognition principle states that revenue should be
recognized in the period in which the performance obligation is satisfied, regardless of
when cash is received.
3. Which of the following describes the impact of purchasing inventory on account?
A. Assets increase and Equity increases
B. Assets increase and Liabilities increase
C. Assets decrease and Liabilities decrease
D. Liabilities increase and Equity decreases
Answer: B
Conceptual Explanation: Purchasing inventory (an asset) on account (creating a
liability/account payable) increases both total assets and total liabilities.
4. A company uses the LIFO inventory method. During a period of rising prices, which of the
following is true?
A. Net income will be higher than under FIFO
B. Income tax expense will be lower than under FIFO
C. Ending inventory will be higher than under FIFO
, D. Cost of goods sold will be lower than under FIFO
Answer: B
Conceptual Explanation: In rising prices, LIFO results in higher COGS, lower net income,
and therefore lower income tax expense compared to FIFO.
5. What is the primary purpose of the Sarbanes-Oxley Act (SOX)?
A. To standardize international accounting principles
B. To restore public trust in corporate financial reporting and internal controls
C. To reduce the complexity of financial reporting for small businesses
D. To eliminate the need for independent audits
Answer: B
Conceptual Explanation: SOX was enacted in response to major corporate scandals to
improve the accuracy and reliability of corporate disclosures and internal control
structures.
6. If a company has a contribution margin ratio of 40% and fixed costs of $120,000, what is
the break-even point in sales dollars?
A. $168,000
B. $200,000
C. $48,000
D. $300,000
DECISION MAKERS FINAL PRACTICE
EXAM QUESTIONS AND VERIFIED
ANSWERS | 100% CORRECT | GRADE A+
1. A company reports a net income of $50,000. During the year, accounts receivable increased
by $10,000, and accounts payable decreased by $5,000. Using the indirect method, what is
the net cash flow from operating activities?
A. $65,000
B. $45,000
C. $55,000
D. $35,000
Answer: D
Conceptual Explanation: Starting with net income ($50,000), an increase in assets (AR) is
a deduction (-$10,000), and a decrease in liabilities (AP) is also a deduction (-$5,000),
resulting in $35,000.
2. Under the accrual basis of accounting, when should revenue be recognized?
A. When the cash is received from the customer
B. At the end of the fiscal year
,C. When the contract is signed by both parties
D. When the performance obligation is satisfied
Answer: D
Conceptual Explanation: The revenue recognition principle states that revenue should be
recognized in the period in which the performance obligation is satisfied, regardless of
when cash is received.
3. Which of the following describes the impact of purchasing inventory on account?
A. Assets increase and Equity increases
B. Assets increase and Liabilities increase
C. Assets decrease and Liabilities decrease
D. Liabilities increase and Equity decreases
Answer: B
Conceptual Explanation: Purchasing inventory (an asset) on account (creating a
liability/account payable) increases both total assets and total liabilities.
4. A company uses the LIFO inventory method. During a period of rising prices, which of the
following is true?
A. Net income will be higher than under FIFO
B. Income tax expense will be lower than under FIFO
C. Ending inventory will be higher than under FIFO
, D. Cost of goods sold will be lower than under FIFO
Answer: B
Conceptual Explanation: In rising prices, LIFO results in higher COGS, lower net income,
and therefore lower income tax expense compared to FIFO.
5. What is the primary purpose of the Sarbanes-Oxley Act (SOX)?
A. To standardize international accounting principles
B. To restore public trust in corporate financial reporting and internal controls
C. To reduce the complexity of financial reporting for small businesses
D. To eliminate the need for independent audits
Answer: B
Conceptual Explanation: SOX was enacted in response to major corporate scandals to
improve the accuracy and reliability of corporate disclosures and internal control
structures.
6. If a company has a contribution margin ratio of 40% and fixed costs of $120,000, what is
the break-even point in sales dollars?
A. $168,000
B. $200,000
C. $48,000
D. $300,000
