2026/2027 WGU C213 Final Exam
Accounting for Decision Makers
Actual Questions and Verified Answers | 100% Guarantee Pass
70 Questions | 6 Sections | Comprehensive Financial Analysis and Decision-Making Application
Section 1: Accounting Basics and Financial Statements (Questions 1-15)
Q1: A company has total assets of $500,000 and total liabilities of $200,000. If the owner withdraws
$30,000 from the business for personal use, what is the effect on the accounting equation?
A. Assets decrease by $30,000; Owner's Equity decreases by $30,000 [CORRECT]
B. Liabilities increase by $30,000; Assets decrease by $30,000
C. Assets decrease by $30,000; Liabilities decrease by $30,000
D. Owner's Equity increases by $30,000; Assets decrease by $30,000
Correct Answer: A
Rationale: Owner withdrawals reduce both cash (an asset) and owner's equity through a drawing account, preserving the
fundamental equation Assets = Liabilities + Owner's Equity. Answer B incorrectly increases liabilities when no debt
obligation was created. Answer C incorrectly reduces liabilities that are unrelated to the transaction. Answer D incorrectly
increases equity when a withdrawal decreases it. This reflects the WGU C213 emphasis on understanding how transactions
affect each component of the accounting equation, which is foundational knowledge for all subsequent accounting topics.
Q2: Under the double-entry accounting system, when a company purchases supplies on account for $5,000,
which journal entry correctly records this transaction?
A. Debit Supplies $5,000; Credit Accounts Payable $5,000 [CORRECT]
B. Debit Accounts Payable $5,000; Credit Supplies $5,000
C. Debit Supplies $5,000; Credit Cash $5,000
D. Debit Cash $5,000; Credit Supplies $5,000
Correct Answer: A
Rationale: Purchasing supplies on account increases the Supplies asset account (debit) and increases the Accounts Payable
liability account (credit), maintaining the accounting equation balance. Answer B reverses the debits and credits, decreasing
assets and liabilities incorrectly. Answer C incorrectly credits Cash instead of Accounts Payable, implying cash payment
rather than a credit purchase. Answer D would decrease supplies and increase cash, the opposite of the actual transaction.
WGU C213 tests mastery of normal balances: assets and expenses are debited to increase, while liabilities and equity are
credited to increase.
Q3: Which GAAP principle requires that expenses be matched with the revenues they help generate in the
same accounting period?
A. Revenue Recognition Principle
B. Full Disclosure Principle
C. Matching Principle [CORRECT]
WGU C213 - Accounting for Decision Makers Page 1
, D. Conservatism Principle
Correct Answer: C
Rationale: The Matching Principle requires that expenses be recognized in the same period as the revenues they help
produce, ensuring accurate net income measurement. The Revenue Recognition Principle (A) dictates when revenue is
recorded but does not address expense timing. The Full Disclosure Principle (B) requires all material information be
disclosed in financial statements. The Conservatism Principle (D) guides accountants to choose the option that least
overstates assets and income when uncertainty exists. WGU C213 emphasizes distinguishing among these core GAAP
principles as foundational knowledge for financial statement preparation and analysis.
Q4: A company using accrual accounting earned $50,000 in revenue in December but will not receive
payment until January. Under accrual basis accounting, when should this revenue be recognized?
A. In January when cash is received
B. In December when the revenue is earned [CORRECT]
C. Half in December and half in January
D. When the company chooses to record it
Correct Answer: B
Rationale: Accrual accounting recognizes revenue when it is earned regardless of when cash is received, in accordance with
the Revenue Recognition Principle. Answer A describes cash basis accounting, which delays recognition until payment is
actually received. Answer C has no basis in GAAP, as revenue is not allocated across periods arbitrarily. Answer D violates
the objectivity and consistency principles of GAAP, which require systematic and unbiased recognition. WGU C213 heavily
tests the distinction between accrual and cash basis accounting because it is fundamental to understanding how financial
statements accurately reflect economic activity during a period.
Q5: A company purchases equipment for $60,000 with a useful life of 5 years and no salvage value. Using
the straight-line method, what is the depreciation expense for year 2?
A. $60,000
B. $30,000
C. $12,000 [CORRECT]
D. $24,000
Correct Answer: C
Rationale: Straight-line depreciation allocates the cost of an asset evenly over its useful life: $60, years = $12,000
per year, and this amount is the same for every year including year 2. Answer A is the full cost with no depreciation
applied. Answer B represents 2 years of depreciation, not one year. Answer D would imply a 2.5-year useful life
calculation error ($60,000 / $24,000). WGU C213 tests understanding of depreciation methods as part of adjusting entries
under accrual accounting, ensuring students can properly allocate asset costs to match revenue generation across periods.
Q6: Which of the following correctly lists the sections of a multi-step income statement in order from top to
bottom?
A. Gross Profit, Operating Income, Net Income before Taxes, Net Income [CORRECT]
B. Net Sales, Cost of Goods Sold, Net Income, Gross Profit
C. Operating Income, Gross Profit, Net Income before Taxes, Net Income
D. Net Sales, Operating Expenses, Gross Profit, Net Income
Correct Answer: A
Rationale: A multi-step income statement begins with Net Sales minus Cost of Goods Sold to arrive at Gross Profit, then
subtracts operating expenses to determine Operating Income, then subtracts interest and other non-operating items to reach
Net Income before Taxes, and finally subtracts income tax expense to determine Net Income. Answer B places Net Income
WGU C213 - Accounting for Decision Makers Page 2
, before Gross Profit, which is logically impossible since Net Income is derived from Gross Profit. Answer C places
Operating Income before Gross Profit, reversing the correct sequence. Answer D places Operating Expenses before Cost of
Goods Sold, making Gross Profit calculation impossible. WGU C213 requires understanding of multi-step income statement
structure as a key competency for financial analysis and decision-making.
Q7: On a classified balance sheet, which of the following is classified as a current asset?
A. Land held for future use
B. Accounts Receivable expected to be collected within one year [CORRECT]
C. Long-term investment in bonds
D. Mortgage payable
Correct Answer: B
Rationale: Current assets are those expected to be converted to cash, sold, or consumed within one year or the operating
cycle, whichever is longer. Accounts Receivable that will be collected within a year qualifies as a current asset. Land (A) is
a long-term (non-current) asset because it provides long-term economic benefit and is not held for sale. Long-term bond
investments (C) are non-current assets because they will not be liquidated within a year. Mortgage payable (D) is a
long-term liability, not an asset at all. WGU C213 tests the classification of balance sheet items because proper
classification is essential for calculating liquidity ratios and accurately assessing a company's financial position.
Q8: Which of the following items would appear in the financing activities section of the statement of cash
flows under the indirect method?
A. Cash received from customers
B. Cash paid to suppliers for inventory
C. Issuance of common stock for cash [CORRECT]
D. Purchase of equipment for cash
Correct Answer: C
Rationale: The financing activities section includes transactions that raise funds from or return funds to owners and
creditors. Issuing common stock for cash is a classic financing activity because it raises equity capital. Cash received from
customers (A) is an operating activity. Cash paid to suppliers (B) is also an operating activity because it relates to core
business operations. Purchase of equipment (D) is an investing activity because it involves the acquisition of a long-term
asset. WGU C213 tests the ability to correctly classify cash flow activities because misclassification undermines the
usefulness of the statement of cash flows for assessing liquidity, solvency, and financial flexibility.
Q9: When preparing a statement of cash flows using the indirect method, how is depreciation expense
treated?
A. It is subtracted from net income in the operating section
B. It is added back to net income in the operating section [CORRECT]
C. It is reported in the investing activities section
D. It is not reported on the statement of cash flows
Correct Answer: B
Rationale: Under the indirect method, depreciation is a non-cash expense that was deducted to arrive at net income but did
not actually reduce cash, so it must be added back to net income when reconciling to operating cash flow. Answer A would
double-count the non-cash effect by subtracting it again. Answer C incorrectly classifies depreciation as an investing
activity; while depreciation relates to long-term assets, the cash outflow for those assets occurred at the time of purchase,
not through depreciation. Answer D is incorrect because depreciation adjustments are integral to the indirect method
reconciliation. WGU C213 emphasizes understanding the indirect method because it is the most commonly used format in
practice and links accrual net income to actual cash flow.
WGU C213 - Accounting for Decision Makers Page 3
Accounting for Decision Makers
Actual Questions and Verified Answers | 100% Guarantee Pass
70 Questions | 6 Sections | Comprehensive Financial Analysis and Decision-Making Application
Section 1: Accounting Basics and Financial Statements (Questions 1-15)
Q1: A company has total assets of $500,000 and total liabilities of $200,000. If the owner withdraws
$30,000 from the business for personal use, what is the effect on the accounting equation?
A. Assets decrease by $30,000; Owner's Equity decreases by $30,000 [CORRECT]
B. Liabilities increase by $30,000; Assets decrease by $30,000
C. Assets decrease by $30,000; Liabilities decrease by $30,000
D. Owner's Equity increases by $30,000; Assets decrease by $30,000
Correct Answer: A
Rationale: Owner withdrawals reduce both cash (an asset) and owner's equity through a drawing account, preserving the
fundamental equation Assets = Liabilities + Owner's Equity. Answer B incorrectly increases liabilities when no debt
obligation was created. Answer C incorrectly reduces liabilities that are unrelated to the transaction. Answer D incorrectly
increases equity when a withdrawal decreases it. This reflects the WGU C213 emphasis on understanding how transactions
affect each component of the accounting equation, which is foundational knowledge for all subsequent accounting topics.
Q2: Under the double-entry accounting system, when a company purchases supplies on account for $5,000,
which journal entry correctly records this transaction?
A. Debit Supplies $5,000; Credit Accounts Payable $5,000 [CORRECT]
B. Debit Accounts Payable $5,000; Credit Supplies $5,000
C. Debit Supplies $5,000; Credit Cash $5,000
D. Debit Cash $5,000; Credit Supplies $5,000
Correct Answer: A
Rationale: Purchasing supplies on account increases the Supplies asset account (debit) and increases the Accounts Payable
liability account (credit), maintaining the accounting equation balance. Answer B reverses the debits and credits, decreasing
assets and liabilities incorrectly. Answer C incorrectly credits Cash instead of Accounts Payable, implying cash payment
rather than a credit purchase. Answer D would decrease supplies and increase cash, the opposite of the actual transaction.
WGU C213 tests mastery of normal balances: assets and expenses are debited to increase, while liabilities and equity are
credited to increase.
Q3: Which GAAP principle requires that expenses be matched with the revenues they help generate in the
same accounting period?
A. Revenue Recognition Principle
B. Full Disclosure Principle
C. Matching Principle [CORRECT]
WGU C213 - Accounting for Decision Makers Page 1
, D. Conservatism Principle
Correct Answer: C
Rationale: The Matching Principle requires that expenses be recognized in the same period as the revenues they help
produce, ensuring accurate net income measurement. The Revenue Recognition Principle (A) dictates when revenue is
recorded but does not address expense timing. The Full Disclosure Principle (B) requires all material information be
disclosed in financial statements. The Conservatism Principle (D) guides accountants to choose the option that least
overstates assets and income when uncertainty exists. WGU C213 emphasizes distinguishing among these core GAAP
principles as foundational knowledge for financial statement preparation and analysis.
Q4: A company using accrual accounting earned $50,000 in revenue in December but will not receive
payment until January. Under accrual basis accounting, when should this revenue be recognized?
A. In January when cash is received
B. In December when the revenue is earned [CORRECT]
C. Half in December and half in January
D. When the company chooses to record it
Correct Answer: B
Rationale: Accrual accounting recognizes revenue when it is earned regardless of when cash is received, in accordance with
the Revenue Recognition Principle. Answer A describes cash basis accounting, which delays recognition until payment is
actually received. Answer C has no basis in GAAP, as revenue is not allocated across periods arbitrarily. Answer D violates
the objectivity and consistency principles of GAAP, which require systematic and unbiased recognition. WGU C213 heavily
tests the distinction between accrual and cash basis accounting because it is fundamental to understanding how financial
statements accurately reflect economic activity during a period.
Q5: A company purchases equipment for $60,000 with a useful life of 5 years and no salvage value. Using
the straight-line method, what is the depreciation expense for year 2?
A. $60,000
B. $30,000
C. $12,000 [CORRECT]
D. $24,000
Correct Answer: C
Rationale: Straight-line depreciation allocates the cost of an asset evenly over its useful life: $60, years = $12,000
per year, and this amount is the same for every year including year 2. Answer A is the full cost with no depreciation
applied. Answer B represents 2 years of depreciation, not one year. Answer D would imply a 2.5-year useful life
calculation error ($60,000 / $24,000). WGU C213 tests understanding of depreciation methods as part of adjusting entries
under accrual accounting, ensuring students can properly allocate asset costs to match revenue generation across periods.
Q6: Which of the following correctly lists the sections of a multi-step income statement in order from top to
bottom?
A. Gross Profit, Operating Income, Net Income before Taxes, Net Income [CORRECT]
B. Net Sales, Cost of Goods Sold, Net Income, Gross Profit
C. Operating Income, Gross Profit, Net Income before Taxes, Net Income
D. Net Sales, Operating Expenses, Gross Profit, Net Income
Correct Answer: A
Rationale: A multi-step income statement begins with Net Sales minus Cost of Goods Sold to arrive at Gross Profit, then
subtracts operating expenses to determine Operating Income, then subtracts interest and other non-operating items to reach
Net Income before Taxes, and finally subtracts income tax expense to determine Net Income. Answer B places Net Income
WGU C213 - Accounting for Decision Makers Page 2
, before Gross Profit, which is logically impossible since Net Income is derived from Gross Profit. Answer C places
Operating Income before Gross Profit, reversing the correct sequence. Answer D places Operating Expenses before Cost of
Goods Sold, making Gross Profit calculation impossible. WGU C213 requires understanding of multi-step income statement
structure as a key competency for financial analysis and decision-making.
Q7: On a classified balance sheet, which of the following is classified as a current asset?
A. Land held for future use
B. Accounts Receivable expected to be collected within one year [CORRECT]
C. Long-term investment in bonds
D. Mortgage payable
Correct Answer: B
Rationale: Current assets are those expected to be converted to cash, sold, or consumed within one year or the operating
cycle, whichever is longer. Accounts Receivable that will be collected within a year qualifies as a current asset. Land (A) is
a long-term (non-current) asset because it provides long-term economic benefit and is not held for sale. Long-term bond
investments (C) are non-current assets because they will not be liquidated within a year. Mortgage payable (D) is a
long-term liability, not an asset at all. WGU C213 tests the classification of balance sheet items because proper
classification is essential for calculating liquidity ratios and accurately assessing a company's financial position.
Q8: Which of the following items would appear in the financing activities section of the statement of cash
flows under the indirect method?
A. Cash received from customers
B. Cash paid to suppliers for inventory
C. Issuance of common stock for cash [CORRECT]
D. Purchase of equipment for cash
Correct Answer: C
Rationale: The financing activities section includes transactions that raise funds from or return funds to owners and
creditors. Issuing common stock for cash is a classic financing activity because it raises equity capital. Cash received from
customers (A) is an operating activity. Cash paid to suppliers (B) is also an operating activity because it relates to core
business operations. Purchase of equipment (D) is an investing activity because it involves the acquisition of a long-term
asset. WGU C213 tests the ability to correctly classify cash flow activities because misclassification undermines the
usefulness of the statement of cash flows for assessing liquidity, solvency, and financial flexibility.
Q9: When preparing a statement of cash flows using the indirect method, how is depreciation expense
treated?
A. It is subtracted from net income in the operating section
B. It is added back to net income in the operating section [CORRECT]
C. It is reported in the investing activities section
D. It is not reported on the statement of cash flows
Correct Answer: B
Rationale: Under the indirect method, depreciation is a non-cash expense that was deducted to arrive at net income but did
not actually reduce cash, so it must be added back to net income when reconciling to operating cash flow. Answer A would
double-count the non-cash effect by subtracting it again. Answer C incorrectly classifies depreciation as an investing
activity; while depreciation relates to long-term assets, the cash outflow for those assets occurred at the time of purchase,
not through depreciation. Answer D is incorrect because depreciation adjustments are integral to the indirect method
reconciliation. WGU C213 emphasizes understanding the indirect method because it is the most commonly used format in
practice and links accrual net income to actual cash flow.
WGU C213 - Accounting for Decision Makers Page 3
