WGU C213 EXAM: ACCOUNTING FOR
DECISION MAKERS COMPREHENSIVE
PREP
1. A company purchased equipment for $50,000 with a residual value of $5,000 and an
estimated life of 5 years. Using the double-declining balance method, what is the
depreciation expense for the second year?
A. $20,000
B. $12,000
C. $10,800
D. $18,000
Answer: B
Conceptual Explanation: Year 1 depreciation is 40% (double the straight-line rate of
20%) of $50,000 = $20,000. Book value becomes $30,000. Year 2 depreciation is 40% of
$30,000 = $12,000.
,2. Under the indirect method of preparing the Statement of Cash Flows, which of the
following would be added to net income to arrive at net cash provided by operating
activities?
A. A decrease in Accounts Payable
B. An increase in Accounts Receivable
C. A gain on the sale of land
D. An increase in Salaries Payable
Answer: D
Conceptual Explanation: An increase in a current liability, such as Salaries Payable,
represents an expense that has not yet been paid in cash, thus it is added back to net
income.
3. Which of the following describes the ‘Matching Principle’ in accrual accounting?
A. Recognizing expenses in the same period as the revenues they helped generate.
B. Ensuring that total assets always equal total liabilities plus equity.
C. Reporting revenues only when cash is received from the customer.
D. Matching the market value of assets to their historical cost on the balance sheet.
Answer: A
Conceptual Explanation: The matching principle dictates that efforts (expenses) be
matched with accomplishments (revenues) in the period the revenue is recognized.
, 4. A company has a contribution margin ratio of 40%. If the company’s fixed costs are
$120,000, what is the break-even point in sales dollars?
A. $300,000
B. $48,000
C. $200,000
D. $72,000
Answer: A
Conceptual Explanation: Break-even sales dollars = Fixed Costs / Contribution Margin
Ratio. $120,.40 = $300,000.
5. In a period of rising prices, which inventory valuation method typically results in the lowest
net income?
A. FIFO (First-In, First-Out)
B. Weighted Average Cost
C. LIFO (Last-In, First-Out)
D. Specific Identification
Answer: C
Conceptual Explanation: LIFO assigns the cost of the most recently purchased (more
expensive) items to Cost of Goods Sold, resulting in higher COGS and lower net income
during inflation.
DECISION MAKERS COMPREHENSIVE
PREP
1. A company purchased equipment for $50,000 with a residual value of $5,000 and an
estimated life of 5 years. Using the double-declining balance method, what is the
depreciation expense for the second year?
A. $20,000
B. $12,000
C. $10,800
D. $18,000
Answer: B
Conceptual Explanation: Year 1 depreciation is 40% (double the straight-line rate of
20%) of $50,000 = $20,000. Book value becomes $30,000. Year 2 depreciation is 40% of
$30,000 = $12,000.
,2. Under the indirect method of preparing the Statement of Cash Flows, which of the
following would be added to net income to arrive at net cash provided by operating
activities?
A. A decrease in Accounts Payable
B. An increase in Accounts Receivable
C. A gain on the sale of land
D. An increase in Salaries Payable
Answer: D
Conceptual Explanation: An increase in a current liability, such as Salaries Payable,
represents an expense that has not yet been paid in cash, thus it is added back to net
income.
3. Which of the following describes the ‘Matching Principle’ in accrual accounting?
A. Recognizing expenses in the same period as the revenues they helped generate.
B. Ensuring that total assets always equal total liabilities plus equity.
C. Reporting revenues only when cash is received from the customer.
D. Matching the market value of assets to their historical cost on the balance sheet.
Answer: A
Conceptual Explanation: The matching principle dictates that efforts (expenses) be
matched with accomplishments (revenues) in the period the revenue is recognized.
, 4. A company has a contribution margin ratio of 40%. If the company’s fixed costs are
$120,000, what is the break-even point in sales dollars?
A. $300,000
B. $48,000
C. $200,000
D. $72,000
Answer: A
Conceptual Explanation: Break-even sales dollars = Fixed Costs / Contribution Margin
Ratio. $120,.40 = $300,000.
5. In a period of rising prices, which inventory valuation method typically results in the lowest
net income?
A. FIFO (First-In, First-Out)
B. Weighted Average Cost
C. LIFO (Last-In, First-Out)
D. Specific Identification
Answer: C
Conceptual Explanation: LIFO assigns the cost of the most recently purchased (more
expensive) items to Cost of Goods Sold, resulting in higher COGS and lower net income
during inflation.
