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WGU C213 ACCOUNTING FOR DECISION MAKERS ABCD
FORMAT EXAM 2026/2027 | Verified Answers | Competency
Validation | Pass Guaranteed - A+ Graded
[Section 1: Financial Accounting Fundamentals & Statement Preparation (Q1-
14)]
Q1. A company purchases $15,000 of equipment on credit. Which of the following
correctly describes the effect on the accounting equation?
A. Assets decrease by $15,000 and liabilities increase by $15,000. B. Assets increase
by $15,000 and equity decreases by $15,000. C. Assets increase by $15,000 and
liabilities increase by $15,000. [CORRECT] D. Assets remain unchanged and liabilities
increase by $15,000.
Rationale: Equipment (asset) increases by $15,000 and accounts payable (liability)
increases by $15,000; the accounting equation (Assets = Liabilities + Equity) remains
in balance.
Correct Answer: C
Q2. A company pays $2,500 cash for rent expense. The journal entry includes:
A. Debit Rent Expense $2,500; Credit Accounts Payable $2,500. B. Debit Cash $2,500;
Credit Rent Expense $2,500. C. Debit Rent Expense $2,500; Credit Cash $2,500.
[CORRECT] D. Debit Prepaid Rent $2,500; Credit Cash $2,500.
Rationale: Expenses increase with debits and assets decrease with credits; cash is
credited because it was paid out, and rent expense is debited to recognize the cost.
Correct Answer: C
Q3. On December 31, a company has earned $4,000 of revenue that will not be billed
until January. The adjusting entry on December 31 includes:
A. Debit Cash $4,000; Credit Revenue $4,000. B. Debit Accounts Receivable $4,000;
Credit Unearned Revenue $4,000. C. Debit Accounts Receivable $4,000; Credit Service
Revenue $4,000. [CORRECT] D. No entry is needed until cash is received.
Rationale: Accrued revenue requires debiting Accounts Receivable and crediting
Revenue to recognize earned income in the proper period under accrual accounting.
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Correct Answer: C
Q4. A company paid $12,000 for a 12-month insurance policy on November 1 and
recorded it as Prepaid Insurance. The adjusting entry on December 31 includes:
A. Debit Insurance Expense $2,000; Credit Prepaid Insurance $2,000. [CORRECT] B.
Debit Insurance Expense $12,000; Credit Prepaid Insurance $12,000. C. Debit Prepaid
Insurance $2,000; Credit Insurance Expense $2,000. D. Debit Insurance Expense
$10,000; Credit Prepaid Insurance $10,000.
Rationale: Two months (November–December) have expired; $12,000 ÷ 12 =
$1,000/month × 2 months = $2,000 expense, reducing the prepaid asset.
Correct Answer: A
Q5. A company purchased equipment for $50,000 with a 10-year useful life and no
salvage value. Using straight-line depreciation, the annual adjusting entry includes:
A. Debit Depreciation Expense $5,000; Credit Accumulated Depreciation $5,000.
[CORRECT] B. Debit Depreciation Expense $50,000; Credit Equipment $50,000. C.
Debit Accumulated Depreciation $5,000; Credit Depreciation Expense $5,000. D.
Debit Equipment $5,000; Credit Depreciation Expense $5,000.
Rationale: Straight-line depreciation = ($50,000 - $0) ÷ 10 = $5,000/year;
accumulated depreciation is credited (contra-asset) and depreciation expense is
debited.
Correct Answer: A
Q6. At year-end, a company estimates bad debts at 3% of $200,000 credit sales. The
adjusting entry includes:
A. Debit Bad Debt Expense $6,000; Credit Allowance for Doubtful Accounts $6,000.
[CORRECT] B. Debit Allowance for Doubtful Accounts $6,000; Credit Bad Debt
Expense $6,000. C. Debit Accounts Receivable $6,000; Credit Bad Debt Expense
$6,000. D. Debit Bad Debt Expense $6,000; Credit Accounts Receivable $6,000.
Rationale: The percentage-of-sales method debits Bad Debt Expense and credits the
contra-asset Allowance for Doubtful Accounts; direct write-off is not GAAP for
estimating uncollectibles.
Correct Answer: A
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Q7. Which is the correct order of financial statement preparation?
A. Balance sheet, income statement, statement of retained earnings, statement of
cash flows. B. Income statement, statement of retained earnings, balance sheet,
statement of cash flows. [CORRECT] C. Statement of cash flows, income statement,
balance sheet, statement of retained earnings. D. Statement of retained earnings,
balance sheet, income statement, statement of cash flows.
Rationale: Net income from the income statement flows to retained earnings; ending
retained earnings flows to the balance sheet; the cash flow statement uses balance
sheet changes and net income.
Correct Answer: B
Q8. Which of the following is classified as an operating activity on the statement of
cash flows?
A. Purchase of equipment for $25,000. B. Issuance of common stock for $50,000. C.
Payment of $10,000 to suppliers for inventory. [CORRECT] D. Sale of land for
$40,000.
Rationale: Payments to suppliers are operating activities; equipment and land
transactions are investing, and stock issuance is financing.
Correct Answer: C
Q9. A company sells a building for $150,000 cash. On the statement of cash flows,
this is reported as:
A. An operating inflow of $150,000. B. An investing inflow of $150,000. [CORRECT] C.
A financing inflow of $150,000. D. A non-cash transaction disclosed only in notes.
Rationale: Sales of long-term assets (property, plant, equipment) are investing
activities; purchases and sales of productive assets are never operating activities.
Correct Answer: B
Q10. A company repays a $30,000 bank loan principal. This is reported on the
statement of cash flows as:
A. Operating outflow of $30,000. B. Investing outflow of $30,000. C. Financing
outflow of $30,000. [CORRECT] D. Non-cash financing activity.
WGU C213 ACCOUNTING FOR DECISION MAKERS ABCD
FORMAT EXAM 2026/2027 | Verified Answers | Competency
Validation | Pass Guaranteed - A+ Graded
[Section 1: Financial Accounting Fundamentals & Statement Preparation (Q1-
14)]
Q1. A company purchases $15,000 of equipment on credit. Which of the following
correctly describes the effect on the accounting equation?
A. Assets decrease by $15,000 and liabilities increase by $15,000. B. Assets increase
by $15,000 and equity decreases by $15,000. C. Assets increase by $15,000 and
liabilities increase by $15,000. [CORRECT] D. Assets remain unchanged and liabilities
increase by $15,000.
Rationale: Equipment (asset) increases by $15,000 and accounts payable (liability)
increases by $15,000; the accounting equation (Assets = Liabilities + Equity) remains
in balance.
Correct Answer: C
Q2. A company pays $2,500 cash for rent expense. The journal entry includes:
A. Debit Rent Expense $2,500; Credit Accounts Payable $2,500. B. Debit Cash $2,500;
Credit Rent Expense $2,500. C. Debit Rent Expense $2,500; Credit Cash $2,500.
[CORRECT] D. Debit Prepaid Rent $2,500; Credit Cash $2,500.
Rationale: Expenses increase with debits and assets decrease with credits; cash is
credited because it was paid out, and rent expense is debited to recognize the cost.
Correct Answer: C
Q3. On December 31, a company has earned $4,000 of revenue that will not be billed
until January. The adjusting entry on December 31 includes:
A. Debit Cash $4,000; Credit Revenue $4,000. B. Debit Accounts Receivable $4,000;
Credit Unearned Revenue $4,000. C. Debit Accounts Receivable $4,000; Credit Service
Revenue $4,000. [CORRECT] D. No entry is needed until cash is received.
Rationale: Accrued revenue requires debiting Accounts Receivable and crediting
Revenue to recognize earned income in the proper period under accrual accounting.
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Correct Answer: C
Q4. A company paid $12,000 for a 12-month insurance policy on November 1 and
recorded it as Prepaid Insurance. The adjusting entry on December 31 includes:
A. Debit Insurance Expense $2,000; Credit Prepaid Insurance $2,000. [CORRECT] B.
Debit Insurance Expense $12,000; Credit Prepaid Insurance $12,000. C. Debit Prepaid
Insurance $2,000; Credit Insurance Expense $2,000. D. Debit Insurance Expense
$10,000; Credit Prepaid Insurance $10,000.
Rationale: Two months (November–December) have expired; $12,000 ÷ 12 =
$1,000/month × 2 months = $2,000 expense, reducing the prepaid asset.
Correct Answer: A
Q5. A company purchased equipment for $50,000 with a 10-year useful life and no
salvage value. Using straight-line depreciation, the annual adjusting entry includes:
A. Debit Depreciation Expense $5,000; Credit Accumulated Depreciation $5,000.
[CORRECT] B. Debit Depreciation Expense $50,000; Credit Equipment $50,000. C.
Debit Accumulated Depreciation $5,000; Credit Depreciation Expense $5,000. D.
Debit Equipment $5,000; Credit Depreciation Expense $5,000.
Rationale: Straight-line depreciation = ($50,000 - $0) ÷ 10 = $5,000/year;
accumulated depreciation is credited (contra-asset) and depreciation expense is
debited.
Correct Answer: A
Q6. At year-end, a company estimates bad debts at 3% of $200,000 credit sales. The
adjusting entry includes:
A. Debit Bad Debt Expense $6,000; Credit Allowance for Doubtful Accounts $6,000.
[CORRECT] B. Debit Allowance for Doubtful Accounts $6,000; Credit Bad Debt
Expense $6,000. C. Debit Accounts Receivable $6,000; Credit Bad Debt Expense
$6,000. D. Debit Bad Debt Expense $6,000; Credit Accounts Receivable $6,000.
Rationale: The percentage-of-sales method debits Bad Debt Expense and credits the
contra-asset Allowance for Doubtful Accounts; direct write-off is not GAAP for
estimating uncollectibles.
Correct Answer: A
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Q7. Which is the correct order of financial statement preparation?
A. Balance sheet, income statement, statement of retained earnings, statement of
cash flows. B. Income statement, statement of retained earnings, balance sheet,
statement of cash flows. [CORRECT] C. Statement of cash flows, income statement,
balance sheet, statement of retained earnings. D. Statement of retained earnings,
balance sheet, income statement, statement of cash flows.
Rationale: Net income from the income statement flows to retained earnings; ending
retained earnings flows to the balance sheet; the cash flow statement uses balance
sheet changes and net income.
Correct Answer: B
Q8. Which of the following is classified as an operating activity on the statement of
cash flows?
A. Purchase of equipment for $25,000. B. Issuance of common stock for $50,000. C.
Payment of $10,000 to suppliers for inventory. [CORRECT] D. Sale of land for
$40,000.
Rationale: Payments to suppliers are operating activities; equipment and land
transactions are investing, and stock issuance is financing.
Correct Answer: C
Q9. A company sells a building for $150,000 cash. On the statement of cash flows,
this is reported as:
A. An operating inflow of $150,000. B. An investing inflow of $150,000. [CORRECT] C.
A financing inflow of $150,000. D. A non-cash transaction disclosed only in notes.
Rationale: Sales of long-term assets (property, plant, equipment) are investing
activities; purchases and sales of productive assets are never operating activities.
Correct Answer: B
Q10. A company repays a $30,000 bank loan principal. This is reported on the
statement of cash flows as:
A. Operating outflow of $30,000. B. Investing outflow of $30,000. C. Financing
outflow of $30,000. [CORRECT] D. Non-cash financing activity.
