WGU C213 ACCOUNTING FOR
DECISION MAKERS COMPREHENSIVE
EXAM QUESTIONS AND ANSWERS
1. A company reports a net income of $50,000. During the year, accounts receivable increased
by $10,000 and accounts payable decreased by $5,000. What is the net cash flow from
operating activities using the indirect method?
A. $35,000
B. $65,000
C. $55,000
D. $45,000
Answer: A
Conceptual Explanation: Starting with net income ($50,000), you subtract an increase in
assets (A/R, -$10,000) and subtract a decrease in liabilities (A/P, -$5,000), resulting in
$35,000.
2. Under the accrual basis of accounting, when is revenue generally recognized?
A. When cash is received from the customer
,B. At the end of the fiscal year
C. When the purchase order is received
D. When the performance obligation is satisfied
Answer: D
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned, which
occurs when the performance obligation to the customer is satisfied, regardless of when
cash is received.
3. Which financial statement provides a ‘snapshot’ of a company’s financial position at a
specific point in time?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Statement of Retained Earnings
Answer: C
Conceptual Explanation: The Balance Sheet reports assets, liabilities, and equity at a
specific point in time, unlike the other statements which report activity over a period.
4. In a period of rising prices, which inventory cost flow method results in the lowest net
income?
A. LIFO (Last-In, First-Out)
, B. FIFO (First-In, First-Out)
C. Weighted Average Cost
D. Specific Identification
Answer: A
Conceptual Explanation: LIFO assigns the most recent (higher) costs to Cost of Goods
Sold, which increases expenses and lowers net income when prices are rising.
5. A company has a current ratio of 2.5. If they use cash to pay off a current liability, what
happens to the current ratio?
A. The ratio remains the same
B. The ratio decreases
C. The ratio increases
D. The effect cannot be determined
Answer: C
Conceptual Explanation: Since the ratio is greater than 1.0, reducing both the numerator
(Current Assets) and denominator (Current Liabilities) by the same amount increases the
ratio.
6. Which of the following is considered a product cost in a manufacturing environment?
A. Factory supervisor salary
B. Sales commissions
DECISION MAKERS COMPREHENSIVE
EXAM QUESTIONS AND ANSWERS
1. A company reports a net income of $50,000. During the year, accounts receivable increased
by $10,000 and accounts payable decreased by $5,000. What is the net cash flow from
operating activities using the indirect method?
A. $35,000
B. $65,000
C. $55,000
D. $45,000
Answer: A
Conceptual Explanation: Starting with net income ($50,000), you subtract an increase in
assets (A/R, -$10,000) and subtract a decrease in liabilities (A/P, -$5,000), resulting in
$35,000.
2. Under the accrual basis of accounting, when is revenue generally recognized?
A. When cash is received from the customer
,B. At the end of the fiscal year
C. When the purchase order is received
D. When the performance obligation is satisfied
Answer: D
Conceptual Explanation: Accrual accounting recognizes revenue when it is earned, which
occurs when the performance obligation to the customer is satisfied, regardless of when
cash is received.
3. Which financial statement provides a ‘snapshot’ of a company’s financial position at a
specific point in time?
A. Income Statement
B. Statement of Cash Flows
C. Balance Sheet
D. Statement of Retained Earnings
Answer: C
Conceptual Explanation: The Balance Sheet reports assets, liabilities, and equity at a
specific point in time, unlike the other statements which report activity over a period.
4. In a period of rising prices, which inventory cost flow method results in the lowest net
income?
A. LIFO (Last-In, First-Out)
, B. FIFO (First-In, First-Out)
C. Weighted Average Cost
D. Specific Identification
Answer: A
Conceptual Explanation: LIFO assigns the most recent (higher) costs to Cost of Goods
Sold, which increases expenses and lowers net income when prices are rising.
5. A company has a current ratio of 2.5. If they use cash to pay off a current liability, what
happens to the current ratio?
A. The ratio remains the same
B. The ratio decreases
C. The ratio increases
D. The effect cannot be determined
Answer: C
Conceptual Explanation: Since the ratio is greater than 1.0, reducing both the numerator
(Current Assets) and denominator (Current Liabilities) by the same amount increases the
ratio.
6. Which of the following is considered a product cost in a manufacturing environment?
A. Factory supervisor salary
B. Sales commissions
