Accounting For Decision Makers - WGU C213 - Test Prep Questions and Answers | 100% Verified

Accounting For Decision Makers - WGU C213 - Test Prep Questions and Answers | 100% Verified What 2 items of information are revealed on the balance sheet? - Answer- Ownership & Debt What is defined as the residual interest in the net assets of the company? - Answer- Owners' equity What are long term assets? - Answer- The value of a company's assets minus accumulated depreciation. These are not current assets. What is the long-term asset equation? - Answer- Long-term assets = Total liabilities + total owners' equity - current assets When should revenue be recognized? - Answer- When customers have received value What are the two points of revenue recognition category? - Answer- When the work has been substantially complete (the company has done something) AND cash or a valid promise of payment has been received (the company has received something in return) What situation should result in revenue recognition on the income statement for the year ending in 12/31/14 if the firm is using accrual-based accounting? - Answer- In 2014, a company provides services to a customer for which cash will be collected in the next year (2015) What is accrual based accounting? - Answer- Recognizing business revenue and matching expenses when they are generated - not when money changes hands. This means companies record revenue when it is earned, not when the company collects the money. Which category on the statement of cash flows summarizes cash receipts and payments to owners and creditors of the company? - Answer- Cash flows from financing activities Where would an investor find a summary of a company's significant accounting policies? - Answer- In the notes to financial statements Which assurance does an external audit report provide for its readers? - Answer- The company's financial statements fairly reflect its financial position Reliable - Answer- Information that can be verified Relevant - Answer- Information having to do with the matter at hand Material - Answer- Information that is important enough to make a difference Conservatism - Answer- Information related to recognizing losses as they occur What are the five steps in the decision cycle? - Answer- 1.) Prepare financial statements 2.) Analyze financial statements 3.) Gather information 4.) Make decision 5.) Implement decision What does it mean if a company has a debt ratio of 101.5%? - Answer- The company has 1.5% more total liabilities than total assets What is consistent with a continual decline in gross profit if the firm's cost of goods sold remains the same? - Answer- Continual decrease in sales How do you find out if an adequacy ratio represents a cash cow? - Answer- Divide the numbers given by each other. Ex. $6,991/$5,486 = 1.27% Choose the two with the highest percentage