WGU C213 ACCOUNTING FOR
DECISION MAKERS FINAL EXAM
QUESTIONS AND VERIFIED ANSWERS |
100% CORRECT | GRADE A+
1. Which of the following describes the impact on the accounting equation when a company
purchases equipment using a combination of cash and a long-term note payable?
A. Assets increase, liabilities decrease, and equity remains unchanged.
B. Assets decrease, liabilities increase, and equity increases.
C. Total assets remain unchanged, and liabilities increase.
D. Assets increase, liabilities increase, and equity remains unchanged.
Answer: D
Conceptual Explanation: The equipment increases assets, the cash payment decreases
assets (net increase in assets), and the note payable increases liabilities. Equity is
unaffected at the time of purchase.
2. Under the accrual basis of accounting, when is revenue generally recognized?
A. When the cash is collected from the customer.
B. When the performance obligation is satisfied.
C. At the end of the fiscal year regardless of service status.
,D. When the contract is signed by both parties.
Answer: B
Conceptual Explanation: Accrual accounting recognizes revenue when earned
(performance obligation satisfied), not necessarily when cash is received.
3. In a period of rising prices, which inventory cost flow assumption typically 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 COGS, which
reduces gross profit and net income during inflation.
4. What is the primary purpose of the Statement of Cash Flows?
A. To show the profitability of the company over a period of time.
B. To reconcile the beginning and ending balance of retained earnings.
C. To list all assets and liabilities at a specific point in time.
D. To provide information about cash receipts and cash payments during a period.
, Answer: D
Conceptual Explanation: The statement of cash flows classifies cash movements into
operating, investing, and financing activities.
5. Company A has a Current Ratio of 2.5 and Company B has a Current Ratio of 0.8. Which
statement is most likely true?
A. Company B is more profitable than Company A.
B. Company A has better long-term solvency.
C. Company B may have difficulty meeting its short-term obligations.
D. Company A has too much debt relative to its equity.
Answer: C
Conceptual Explanation: A current ratio below 1.0 indicates that current liabilities exceed
current assets, suggesting potential liquidity issues.
6. Which of the following is considered a product cost rather than a period cost?
A. Sales commissions
B. Depreciation on factory equipment
C. Administrative salaries
D. Advertising expenses
Answer: B
DECISION MAKERS FINAL EXAM
QUESTIONS AND VERIFIED ANSWERS |
100% CORRECT | GRADE A+
1. Which of the following describes the impact on the accounting equation when a company
purchases equipment using a combination of cash and a long-term note payable?
A. Assets increase, liabilities decrease, and equity remains unchanged.
B. Assets decrease, liabilities increase, and equity increases.
C. Total assets remain unchanged, and liabilities increase.
D. Assets increase, liabilities increase, and equity remains unchanged.
Answer: D
Conceptual Explanation: The equipment increases assets, the cash payment decreases
assets (net increase in assets), and the note payable increases liabilities. Equity is
unaffected at the time of purchase.
2. Under the accrual basis of accounting, when is revenue generally recognized?
A. When the cash is collected from the customer.
B. When the performance obligation is satisfied.
C. At the end of the fiscal year regardless of service status.
,D. When the contract is signed by both parties.
Answer: B
Conceptual Explanation: Accrual accounting recognizes revenue when earned
(performance obligation satisfied), not necessarily when cash is received.
3. In a period of rising prices, which inventory cost flow assumption typically 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 COGS, which
reduces gross profit and net income during inflation.
4. What is the primary purpose of the Statement of Cash Flows?
A. To show the profitability of the company over a period of time.
B. To reconcile the beginning and ending balance of retained earnings.
C. To list all assets and liabilities at a specific point in time.
D. To provide information about cash receipts and cash payments during a period.
, Answer: D
Conceptual Explanation: The statement of cash flows classifies cash movements into
operating, investing, and financing activities.
5. Company A has a Current Ratio of 2.5 and Company B has a Current Ratio of 0.8. Which
statement is most likely true?
A. Company B is more profitable than Company A.
B. Company A has better long-term solvency.
C. Company B may have difficulty meeting its short-term obligations.
D. Company A has too much debt relative to its equity.
Answer: C
Conceptual Explanation: A current ratio below 1.0 indicates that current liabilities exceed
current assets, suggesting potential liquidity issues.
6. Which of the following is considered a product cost rather than a period cost?
A. Sales commissions
B. Depreciation on factory equipment
C. Administrative salaries
D. Advertising expenses
Answer: B
