WGU C213 ACCOUNTING FOR
DECISION MAKERS COMPREHENSIVE
EXAM QUESTIONS AND ANSWERS
1. Which of the following describes the primary objective of financial accounting?
A. To provide information to internal managers for daily operations.
B. To determine the market value of a company’s common stock.
C. To assist in the calculation of federal income tax liabilities.
D. To provide information to external users such as investors and creditors.
Answer: D
Conceptual Explanation: Financial accounting is primarily focused on providing
information to external stakeholders like investors, lenders, and creditors to help them
make informed decisions.
2. Under the accrual basis of accounting, when should revenue be recognized?
A. When the cash is received from the customer.
B. Only when the related expenses have been fully paid.
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: The revenue recognition principle states that revenue should be
recognized when it is earned (performance obligation met), regardless of when cash is
received.
3. In a period of rising prices (inflation), which inventory valuation method results in the
highest net income?
A. FIFO (First-In, First-Out)
B. LIFO (Last-In, First-Out)
C. Weighted Average Cost
D. Specific Identification
Answer: A
Conceptual Explanation: In an inflationary environment, FIFO assigns the older, lower
costs to Cost of Goods Sold, resulting in a lower expense and higher net income compared
to LIFO.
4. Which financial statement reports a company’s financial position at a specific point in
time?
A. Income Statement
B. Statement of Retained Earnings
, C. Balance Sheet
D. Statement of Cash Flows
Answer: C
Conceptual Explanation: The Balance Sheet provides a ‘snapshot’ of the company’s assets,
liabilities, and equity at a specific date, unlike other statements that cover a period of time.
5. What is the formula for calculating the Contribution Margin Ratio?
A. (Sales - Fixed Costs) / Sales
B. (Sales - Variable Costs) / Sales
C. Net Income / Sales
D. Gross Profit / Sales
Answer: B
Conceptual Explanation: The contribution margin ratio is calculated by taking the
contribution margin (Sales minus Variable Costs) and dividing it by total sales.
6. A company purchases equipment for $50,000 with a $5,000 salvage value and a 5-year
useful life. What is the annual depreciation using the straight-line method?
A. $9,000
B. $10,000
C. $11,000
DECISION MAKERS COMPREHENSIVE
EXAM QUESTIONS AND ANSWERS
1. Which of the following describes the primary objective of financial accounting?
A. To provide information to internal managers for daily operations.
B. To determine the market value of a company’s common stock.
C. To assist in the calculation of federal income tax liabilities.
D. To provide information to external users such as investors and creditors.
Answer: D
Conceptual Explanation: Financial accounting is primarily focused on providing
information to external stakeholders like investors, lenders, and creditors to help them
make informed decisions.
2. Under the accrual basis of accounting, when should revenue be recognized?
A. When the cash is received from the customer.
B. Only when the related expenses have been fully paid.
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: The revenue recognition principle states that revenue should be
recognized when it is earned (performance obligation met), regardless of when cash is
received.
3. In a period of rising prices (inflation), which inventory valuation method results in the
highest net income?
A. FIFO (First-In, First-Out)
B. LIFO (Last-In, First-Out)
C. Weighted Average Cost
D. Specific Identification
Answer: A
Conceptual Explanation: In an inflationary environment, FIFO assigns the older, lower
costs to Cost of Goods Sold, resulting in a lower expense and higher net income compared
to LIFO.
4. Which financial statement reports a company’s financial position at a specific point in
time?
A. Income Statement
B. Statement of Retained Earnings
, C. Balance Sheet
D. Statement of Cash Flows
Answer: C
Conceptual Explanation: The Balance Sheet provides a ‘snapshot’ of the company’s assets,
liabilities, and equity at a specific date, unlike other statements that cover a period of time.
5. What is the formula for calculating the Contribution Margin Ratio?
A. (Sales - Fixed Costs) / Sales
B. (Sales - Variable Costs) / Sales
C. Net Income / Sales
D. Gross Profit / Sales
Answer: B
Conceptual Explanation: The contribution margin ratio is calculated by taking the
contribution margin (Sales minus Variable Costs) and dividing it by total sales.
6. A company purchases equipment for $50,000 with a $5,000 salvage value and a 5-year
useful life. What is the annual depreciation using the straight-line method?
A. $9,000
B. $10,000
C. $11,000
