WGU C213 Final Exam Accounting for Decision Makers
Questions and Answers ()
Multiple-Choice Questions
Question 1: Which of the following best defines the primary focus of accounting for de-
cision makers?
(a) Tracking employee performance metrics
(b) Measuring the environmental impact of business operations
(c) Providing quantitative financial information for economic decisions
(d) Managing customer relationship strategies
Correct Answer: (c) Providing quantitative financial information for eco-
nomic decisions
Explanation: Accounting for decision makers focuses on providing quantita-
tive financial information, primarily about economic entities, to support in-
formed decision-making. This includes financial statements and reports that
help stakeholders evaluate performance and make strategic choices. Options
(a), (b), and (d) are not the primary focus of accounting, as they relate to
HR, environmental management, or marketing, respectively.
Question 2: Which financial statement summarizes a company’s cash inflows and outflows
from operating, investing, and financing activities?
(a) Balance Sheet
(b) Income Statement
(c) Statement of Cash Flows
(d) Statement of Retained Earnings
Correct Answer: (c) Statement of Cash Flows
Explanation: The Statement of Cash Flows details cash inflows and out-
flows from operating, investing, and financing activities over a period. The
Balance Sheet shows assets, liabilities, and equity at a point in time; the
Income Statement reports revenues and expenses; and the Statement of Re-
tained Earnings tracks changes in retained earnings.
Question 3: If a company fails to record accrued wages expense at year-end, what is the
impact on its financial statements?
(a) Overstates assets and understates liabilities
(b) Understates expenses and overstates owner’s equity
(c) Overstates revenues and understates expenses
(d) No impact on financial statements
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, Correct Answer: (b) Understates expenses and overstates owner’s equity
Explanation: Failing to record accrued wages expense understates expenses
(as the cost is not recognized) and liabilities (as the obligation is not recorded).
This results in overstated net income, which increases owner’s equity on the
balance sheet. Options (a), (c), and (d) are incorrect as they do not reflect
the specific impact of this omission.
Question 4: Which organization has the legal authority to establish accounting standards
for publicly held companies in the United States?
(a) Internal Revenue Service (IRS)
(b) Financial Accounting Standards Board (FASB)
(c) Securities and Exchange Commission (SEC)
(d) International Accounting Standards Board (IASB)
Correct Answer: (b) Financial Accounting Standards Board (FASB)
Explanation: The FASB is responsible for establishing Generally Accepted
Accounting Principles (GAAP) for publicly held companies in the U.S. The
SEC oversees compliance but delegates standard-setting to the FASB. The
IRS deals with tax regulations, and the IASB sets international standards
(IFRS).
Question 5: Which of the following is NOT a reason for the integration of worldwide
accounting standards?
(a) Increased globalization of businesses
(b) Comparability of financial statements across countries
(c) Theoretical necessity of a common set of standards
(d) Reduction in complexity for multinational corporations
Correct Answer: (c) Theoretical necessity of a common set of standards
Explanation: The integration of worldwide accounting standards, such as
IFRS, is driven by practical needs like globalization, comparability, and re-
duced complexity for multinational firms. The theoretical necessity is not a
primary driver, as the focus is on practical benefits for financial reporting
and decision-making.
Question 6: What is the formula for calculating operating income?
(a) Revenue - Cost of Goods Sold - Operating Expenses
(b) Net Income + Interest Expense + Taxes
(c) Gross Profit - Operating Expenses
(d) Revenue - Operating Expenses
Correct Answer: (c) Gross Profit - Operating Expenses
Explanation: Operating income is calculated as Gross Profit (Revenue -
Cost of Goods Sold) minus Operating Expenses. Option (a) includes Cost
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, of Goods Sold, which is already accounted for in Gross Profit. Option (b)
describes net income, and (d) omits Cost of Goods Sold.
Question 7: A company has the following data for 2025: Revenue $500,000, Cost of Goods
Sold $200,000, Operating Expenses $150,000, Interest Expense $50,000, and
Taxes $30,000. What is the operating income?
(a) $150,000
(b) $300,000
(c) $100,000
(d) $70,000
Correct Answer: (a) $150,000
Explanation: Operating income = Revenue - Cost of Goods Sold - Operating
Expenses = $500,000 - $200,000 - $150,000 = $150,000. Interest Expense
and Taxes are non-operating items and are not included in operating income.
Question 8: Which of the following is an example of a significant accounting policy dis-
closed in the notes to financial statements?
(a) The company’s marketing strategy
(b) The method used to estimate depreciation
(c) The CEO’s compensation package
(d) The company’s employee training programs
Correct Answer: (b) The method used to estimate depreciation
Explanation: Significant accounting policies, such as depreciation methods
(e.g., straight-line or double-declining balance), are disclosed in the notes to
financial statements to explain how amounts are calculated. Options (a),
(c), and (d) are not accounting policies.
Question 9: Which type of cost is directly traceable to a specific product in a manufac-
turing company?
(a) Period Cost
(b) Indirect Cost
(c) Direct Cost
(d) Fixed Cost
Correct Answer: (c) Direct Cost
Explanation: Direct costs, such as direct materials and direct labor, are
directly traceable to a specific product. Period costs are expensed in the
period incurred, indirect costs are not directly traceable, and fixed costs are
constant regardless of production volume.
Question 10: A company’s balance sheet lists assets in which order?
(a) Alphabetical order
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Questions and Answers ()
Multiple-Choice Questions
Question 1: Which of the following best defines the primary focus of accounting for de-
cision makers?
(a) Tracking employee performance metrics
(b) Measuring the environmental impact of business operations
(c) Providing quantitative financial information for economic decisions
(d) Managing customer relationship strategies
Correct Answer: (c) Providing quantitative financial information for eco-
nomic decisions
Explanation: Accounting for decision makers focuses on providing quantita-
tive financial information, primarily about economic entities, to support in-
formed decision-making. This includes financial statements and reports that
help stakeholders evaluate performance and make strategic choices. Options
(a), (b), and (d) are not the primary focus of accounting, as they relate to
HR, environmental management, or marketing, respectively.
Question 2: Which financial statement summarizes a company’s cash inflows and outflows
from operating, investing, and financing activities?
(a) Balance Sheet
(b) Income Statement
(c) Statement of Cash Flows
(d) Statement of Retained Earnings
Correct Answer: (c) Statement of Cash Flows
Explanation: The Statement of Cash Flows details cash inflows and out-
flows from operating, investing, and financing activities over a period. The
Balance Sheet shows assets, liabilities, and equity at a point in time; the
Income Statement reports revenues and expenses; and the Statement of Re-
tained Earnings tracks changes in retained earnings.
Question 3: If a company fails to record accrued wages expense at year-end, what is the
impact on its financial statements?
(a) Overstates assets and understates liabilities
(b) Understates expenses and overstates owner’s equity
(c) Overstates revenues and understates expenses
(d) No impact on financial statements
1
, Correct Answer: (b) Understates expenses and overstates owner’s equity
Explanation: Failing to record accrued wages expense understates expenses
(as the cost is not recognized) and liabilities (as the obligation is not recorded).
This results in overstated net income, which increases owner’s equity on the
balance sheet. Options (a), (c), and (d) are incorrect as they do not reflect
the specific impact of this omission.
Question 4: Which organization has the legal authority to establish accounting standards
for publicly held companies in the United States?
(a) Internal Revenue Service (IRS)
(b) Financial Accounting Standards Board (FASB)
(c) Securities and Exchange Commission (SEC)
(d) International Accounting Standards Board (IASB)
Correct Answer: (b) Financial Accounting Standards Board (FASB)
Explanation: The FASB is responsible for establishing Generally Accepted
Accounting Principles (GAAP) for publicly held companies in the U.S. The
SEC oversees compliance but delegates standard-setting to the FASB. The
IRS deals with tax regulations, and the IASB sets international standards
(IFRS).
Question 5: Which of the following is NOT a reason for the integration of worldwide
accounting standards?
(a) Increased globalization of businesses
(b) Comparability of financial statements across countries
(c) Theoretical necessity of a common set of standards
(d) Reduction in complexity for multinational corporations
Correct Answer: (c) Theoretical necessity of a common set of standards
Explanation: The integration of worldwide accounting standards, such as
IFRS, is driven by practical needs like globalization, comparability, and re-
duced complexity for multinational firms. The theoretical necessity is not a
primary driver, as the focus is on practical benefits for financial reporting
and decision-making.
Question 6: What is the formula for calculating operating income?
(a) Revenue - Cost of Goods Sold - Operating Expenses
(b) Net Income + Interest Expense + Taxes
(c) Gross Profit - Operating Expenses
(d) Revenue - Operating Expenses
Correct Answer: (c) Gross Profit - Operating Expenses
Explanation: Operating income is calculated as Gross Profit (Revenue -
Cost of Goods Sold) minus Operating Expenses. Option (a) includes Cost
2
, of Goods Sold, which is already accounted for in Gross Profit. Option (b)
describes net income, and (d) omits Cost of Goods Sold.
Question 7: A company has the following data for 2025: Revenue $500,000, Cost of Goods
Sold $200,000, Operating Expenses $150,000, Interest Expense $50,000, and
Taxes $30,000. What is the operating income?
(a) $150,000
(b) $300,000
(c) $100,000
(d) $70,000
Correct Answer: (a) $150,000
Explanation: Operating income = Revenue - Cost of Goods Sold - Operating
Expenses = $500,000 - $200,000 - $150,000 = $150,000. Interest Expense
and Taxes are non-operating items and are not included in operating income.
Question 8: Which of the following is an example of a significant accounting policy dis-
closed in the notes to financial statements?
(a) The company’s marketing strategy
(b) The method used to estimate depreciation
(c) The CEO’s compensation package
(d) The company’s employee training programs
Correct Answer: (b) The method used to estimate depreciation
Explanation: Significant accounting policies, such as depreciation methods
(e.g., straight-line or double-declining balance), are disclosed in the notes to
financial statements to explain how amounts are calculated. Options (a),
(c), and (d) are not accounting policies.
Question 9: Which type of cost is directly traceable to a specific product in a manufac-
turing company?
(a) Period Cost
(b) Indirect Cost
(c) Direct Cost
(d) Fixed Cost
Correct Answer: (c) Direct Cost
Explanation: Direct costs, such as direct materials and direct labor, are
directly traceable to a specific product. Period costs are expensed in the
period incurred, indirect costs are not directly traceable, and fixed costs are
constant regardless of production volume.
Question 10: A company’s balance sheet lists assets in which order?
(a) Alphabetical order
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