WGU C213 ACCOUNTING FOR
DECISION MAKERS FINAL EXAM
STUDY GUIDE QUESTIONS AND
ANSWERS
1. Which of the following best describes the primary objective of financial accounting?
A. To provide information to internal managers for day-to-day decision making.
B. To ensure that the company complies with internal labor regulations.
C. To minimize the tax liability of a corporation through legal means.
D. To provide information to external users such as investors and creditors.
Answer: D
Conceptual Explanation: Financial accounting is focused on reporting the economic
activities of an entity to external parties like investors, regulators, and creditors.
2. Under the accrual basis of accounting, when is revenue generally recognized?
A. When cash is received from the customer.
B. When the invoice is mailed to the customer.
C. At the end of the fiscal year for all contracts signed.
,D. When the performance obligation is satisfied, regardless of cash timing.
Answer: D
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned
(performance obligation satisfied), not necessarily when cash changes hands.
3. If a company’s ending inventory is overstated at the end of Year 1, what is the effect on
Year 1’s Cost of Goods Sold (COGS) and Net Income?
A. COGS is overstated; Net Income is understated.
B. Both COGS and Net Income are overstated.
C. COGS is understated; Net Income is overstated.
D. Both COGS and Net Income are understated.
Answer: C
Conceptual Explanation: Ending inventory is subtracted from goods available for sale to
find COGS. If ending inventory is too high, COGS is too low (understated), which makes Net
Income too high (overstated).
4. Which financial statement reports a company’s financial position at a specific point in
time?
A. Income Statement
B. Balance Sheet
C. Statement of Cash Flows
, D. Statement of Retained Earnings
Answer: B
Conceptual Explanation: The Balance Sheet is a ‘snapshot’ of assets, liabilities, and equity
at a specific date, unlike other statements that cover a period of time.
5. Which of the following is an example of a ‘Product Cost’ in a manufacturing environment?
A. Sales commissions
B. Depreciation on the factory building
C. Advertising expenses
D. Salary of the CEO
Answer: B
Conceptual Explanation: Product costs include direct materials, direct labor, and
manufacturing overhead. Factory depreciation is part of manufacturing overhead.
6. What happens to the break-even point in units if the selling price per unit increases while
all other variables remain constant?
A. The break-even point increases.
B. The effect cannot be determined without knowing fixed costs.
C. The break-even point remains unchanged.
D. The break-even point decreases.
DECISION MAKERS FINAL EXAM
STUDY GUIDE QUESTIONS AND
ANSWERS
1. Which of the following best describes the primary objective of financial accounting?
A. To provide information to internal managers for day-to-day decision making.
B. To ensure that the company complies with internal labor regulations.
C. To minimize the tax liability of a corporation through legal means.
D. To provide information to external users such as investors and creditors.
Answer: D
Conceptual Explanation: Financial accounting is focused on reporting the economic
activities of an entity to external parties like investors, regulators, and creditors.
2. Under the accrual basis of accounting, when is revenue generally recognized?
A. When cash is received from the customer.
B. When the invoice is mailed to the customer.
C. At the end of the fiscal year for all contracts signed.
,D. When the performance obligation is satisfied, regardless of cash timing.
Answer: D
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned
(performance obligation satisfied), not necessarily when cash changes hands.
3. If a company’s ending inventory is overstated at the end of Year 1, what is the effect on
Year 1’s Cost of Goods Sold (COGS) and Net Income?
A. COGS is overstated; Net Income is understated.
B. Both COGS and Net Income are overstated.
C. COGS is understated; Net Income is overstated.
D. Both COGS and Net Income are understated.
Answer: C
Conceptual Explanation: Ending inventory is subtracted from goods available for sale to
find COGS. If ending inventory is too high, COGS is too low (understated), which makes Net
Income too high (overstated).
4. Which financial statement reports a company’s financial position at a specific point in
time?
A. Income Statement
B. Balance Sheet
C. Statement of Cash Flows
, D. Statement of Retained Earnings
Answer: B
Conceptual Explanation: The Balance Sheet is a ‘snapshot’ of assets, liabilities, and equity
at a specific date, unlike other statements that cover a period of time.
5. Which of the following is an example of a ‘Product Cost’ in a manufacturing environment?
A. Sales commissions
B. Depreciation on the factory building
C. Advertising expenses
D. Salary of the CEO
Answer: B
Conceptual Explanation: Product costs include direct materials, direct labor, and
manufacturing overhead. Factory depreciation is part of manufacturing overhead.
6. What happens to the break-even point in units if the selling price per unit increases while
all other variables remain constant?
A. The break-even point increases.
B. The effect cannot be determined without knowing fixed costs.
C. The break-even point remains unchanged.
D. The break-even point decreases.
