GU C213 Accounting for Decision Makers
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Objective Assessment Guide Official Practice
Exam Actual Exam 2026/2027 with Detailed
Rationales | Complete Exam-Style Questions |
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SECTION 1: FINANCIAL ACCOUNTING & REPORTING Q1 – Q10
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Question 1 of 50
pex Manufacturing paid $12,000 for a one-year commercial insurance policy on December 1.
A
Assuming accrual accounting, the expense recognized on the December 31 income statement
is $1,000.
. $1,000 ✓ CORRECT
A
B. $12,000
C. $11,000
D. $0
orrect Answer: A
C
Rationale: Accrual accounting requires matching expenses to the periods benefited, meaning
only one month of the $12,000 premium is recognized in December. A common error is
selecting $12,000, which reflects cash basis accounting that records the entire payment as an
expense upon payment. Always distinguish between cash flows and the timing of expense
recognition under GAAP.
Question 2 of 50
right Horizons Corp. has total assets of $500,000 and total liabilities of $200,000 at year-end.
B
During the year, the company earned revenues of $150,000 and incurred expenses of
$100,000. The total shareholders' equity at year-end is $300,000.
. $250,000
A
B. $300,000 ✓ CORRECT
C. $350,000
,D. $200,000
orrect Answer: B
C
Rationale: The accounting equation dictates that Equity equals Assets minus Liabilities,
resulting in $300,000 ($500,000 - $200,000). Revenues and expenses are already embedded in
the ending equity balance through retained earnings, so adding net income again would
double-count it. On the exam, ensure you are using the fundamental accounting equation rather
than reconstructing equity from income statement data.
Question 3 of 50
loudSync Software receives $60,000 upfront on October 1 for a one-year software
C
subscription. Under ASC 606, the revenue recognized by December 31 is $15,000.
. $60,000
A
B. $5,000
C. $15,000 ✓ CORRECT
D. $45,000
orrect Answer: C
C
Rationale: ASC 606 requires revenue recognition as performance obligations are satisfied,
meaning $15,000 is recognized for the three months of service provided by December 31.
Recognizing the full $60,000 upfront incorrectly treats the cash receipt as immediate revenue
rather than deferred revenue until the service is delivered. Always allocate transaction prices
over the contract term for subscription services.
Question 4 of 50
retailer sells a heavy-duty appliance for $800 with a 2-year warranty included. The warranty is
A
estimated to cost $50 per unit sold. The matching principle requires the $50 warranty expense
to be recognized in the same period as the $800 sale.
. When the warranty claim is paid
A
B. Over the 2-year warranty period
C. When the customer pays for the appliance
D. In the same period as the $800 sale ✓ CORRECT
orrect Answer: D
C
Rationale: The matching principle mandates that expenses associated with generating revenue
be recognized in the same period as that revenue, so the estimated warranty expense is
recorded when the appliance is sold. Recognizing the expense when the warranty claim is paid
violates the matching principle by disconnecting the expense from the revenue it helped
generate. Estimate warranties at the point of sale to properly match costs to revenues.
, Question 5 of 50
company purchases equipment for $100,000 with a zero salvage value and a 5-year useful
A
life. Using the double-declining balance method, the depreciation expense for the first year is
$40,000.
. $40,000 ✓ CORRECT
A
B. $20,000
C. $50,000
D. $25,000
orrect Answer: A
C
Rationale: The double-declining balance method applies double the straight-line rate (40%) to
the asset's beginning book value, resulting in $40,000 ($100,000 x 40%) for the first year. Using
the straight-line rate of 20% yields $20,000, which fails to account for the accelerated
depreciation factor inherent in the method. Remember that declining balance methods ignore
salvage value in the calculation until the final years.
Question 6 of 50
uring a period of rising inventory costs, a company using LIFO will report a lower net income
D
compared to a company using FIFO.
. Higher net income
A
B. Lower net income ✓ CORRECT
C. Identical net income
D. Higher cash flow
orrect Answer: B
C
Rationale: In an inflationary environment, LIFO assigns the most recent, higher costs to cost of
goods sold, resulting in lower net income compared to FIFO. FIFO assigns older, lower costs to
cost of goods sold, which artificially inflates net income during periods of rising prices.
Understand how cost flow assumptions directly impact the income statement under different
economic conditions.
Question 7 of 50
ynamic Industries has $50,000 in Accounts Receivable and a $2,000 credit balance in the
D
Allowance for Doubtful Accounts. Management estimates 5% of receivables will be
uncollectible. The Bad Debt Expense for the year is $500.
. $2,500
A
B. $2,000
C. $500 ✓ CORRECT
W
Objective Assessment Guide Official Practice
Exam Actual Exam 2026/2027 with Detailed
Rationales | Complete Exam-Style Questions |
Pass Guaranteed – A+ Graded
═════════════════════════════════════
═
SECTION 1: FINANCIAL ACCOUNTING & REPORTING Q1 – Q10
══════════════════════════════════════
Question 1 of 50
pex Manufacturing paid $12,000 for a one-year commercial insurance policy on December 1.
A
Assuming accrual accounting, the expense recognized on the December 31 income statement
is $1,000.
. $1,000 ✓ CORRECT
A
B. $12,000
C. $11,000
D. $0
orrect Answer: A
C
Rationale: Accrual accounting requires matching expenses to the periods benefited, meaning
only one month of the $12,000 premium is recognized in December. A common error is
selecting $12,000, which reflects cash basis accounting that records the entire payment as an
expense upon payment. Always distinguish between cash flows and the timing of expense
recognition under GAAP.
Question 2 of 50
right Horizons Corp. has total assets of $500,000 and total liabilities of $200,000 at year-end.
B
During the year, the company earned revenues of $150,000 and incurred expenses of
$100,000. The total shareholders' equity at year-end is $300,000.
. $250,000
A
B. $300,000 ✓ CORRECT
C. $350,000
,D. $200,000
orrect Answer: B
C
Rationale: The accounting equation dictates that Equity equals Assets minus Liabilities,
resulting in $300,000 ($500,000 - $200,000). Revenues and expenses are already embedded in
the ending equity balance through retained earnings, so adding net income again would
double-count it. On the exam, ensure you are using the fundamental accounting equation rather
than reconstructing equity from income statement data.
Question 3 of 50
loudSync Software receives $60,000 upfront on October 1 for a one-year software
C
subscription. Under ASC 606, the revenue recognized by December 31 is $15,000.
. $60,000
A
B. $5,000
C. $15,000 ✓ CORRECT
D. $45,000
orrect Answer: C
C
Rationale: ASC 606 requires revenue recognition as performance obligations are satisfied,
meaning $15,000 is recognized for the three months of service provided by December 31.
Recognizing the full $60,000 upfront incorrectly treats the cash receipt as immediate revenue
rather than deferred revenue until the service is delivered. Always allocate transaction prices
over the contract term for subscription services.
Question 4 of 50
retailer sells a heavy-duty appliance for $800 with a 2-year warranty included. The warranty is
A
estimated to cost $50 per unit sold. The matching principle requires the $50 warranty expense
to be recognized in the same period as the $800 sale.
. When the warranty claim is paid
A
B. Over the 2-year warranty period
C. When the customer pays for the appliance
D. In the same period as the $800 sale ✓ CORRECT
orrect Answer: D
C
Rationale: The matching principle mandates that expenses associated with generating revenue
be recognized in the same period as that revenue, so the estimated warranty expense is
recorded when the appliance is sold. Recognizing the expense when the warranty claim is paid
violates the matching principle by disconnecting the expense from the revenue it helped
generate. Estimate warranties at the point of sale to properly match costs to revenues.
, Question 5 of 50
company purchases equipment for $100,000 with a zero salvage value and a 5-year useful
A
life. Using the double-declining balance method, the depreciation expense for the first year is
$40,000.
. $40,000 ✓ CORRECT
A
B. $20,000
C. $50,000
D. $25,000
orrect Answer: A
C
Rationale: The double-declining balance method applies double the straight-line rate (40%) to
the asset's beginning book value, resulting in $40,000 ($100,000 x 40%) for the first year. Using
the straight-line rate of 20% yields $20,000, which fails to account for the accelerated
depreciation factor inherent in the method. Remember that declining balance methods ignore
salvage value in the calculation until the final years.
Question 6 of 50
uring a period of rising inventory costs, a company using LIFO will report a lower net income
D
compared to a company using FIFO.
. Higher net income
A
B. Lower net income ✓ CORRECT
C. Identical net income
D. Higher cash flow
orrect Answer: B
C
Rationale: In an inflationary environment, LIFO assigns the most recent, higher costs to cost of
goods sold, resulting in lower net income compared to FIFO. FIFO assigns older, lower costs to
cost of goods sold, which artificially inflates net income during periods of rising prices.
Understand how cost flow assumptions directly impact the income statement under different
economic conditions.
Question 7 of 50
ynamic Industries has $50,000 in Accounts Receivable and a $2,000 credit balance in the
D
Allowance for Doubtful Accounts. Management estimates 5% of receivables will be
uncollectible. The Bad Debt Expense for the year is $500.
. $2,500
A
B. $2,000
C. $500 ✓ CORRECT
