WGU C214 CHAPTER 3 – BIGFOOT QUESTIONS WITH CORRECT ANSWERS 2025

WGU C214 CHAPTER 3 – BIGFOOT QUESTIONS
WITH CORRECT ANSWERS 2025
3QCategoriesQofQcashQflowQare.....Q-QCORRECTQANSWERQ-Operations,QInvesting,QFinancing-



CashQflowQfromQoperationsQcannotQbeQmanaged.Q-QCORRECTQANSWERQ-FALSE-
CFOQcanQbeQdramaticallyQimpactedQbyQmanagerialQdiscretionQinQtheQfinancialQreportingQprocess.



TheQStatementQofQCashQFlowsQcategorizesQcashQflowQintoQcashQflowQfromQoperations,QcashQflowQfromQpro
duction,QandQcashQflowQfromQfinancing.Q-QCORRECTQANSWERQ-FALSE-
CashQflowQfromQproductionQisQnotQaQcategory.QTheQthreeQcashQflowQareasQareQfromQoperations,Qinvesting,
QandQfinancing.




(True/False)QUnlikeQnetQincome,QCFOQisQnotQsubjectQtoQmanagerialQdiscretionQorQmanipulation.Q-
QCORRECTQANSWERQ-FALSE-

Solution:QTheQanswerQisQfalse.QWhileQgrossQcashQflowsQareQdifficultQtoQmanage/manipulate,QitQisQrelatively
QeasyQtoQshiftQcashQflowsQbetweenQtheQactivityQcategoriesQ(e.g.,QshiftingQbetweenQCFOQandQCFI).QHence,Qt

heQanalystQmustQstillQbeQcarefulQtoQunderstandQtheQassumptions/estimates/decisionsQmadeQinQtheQreport
edQdata.



NetQincomeQfactQorQopinion

CashQflowQfactQorQopinionQ-QCORRECTQANSWERQ-NetQIncomeQ=QOpinion

CashflowQ=QFact



WhichQofQtheQfollowingQisQnotQaQreasonQforQtheQdifferenceQbetweenQCFOQandQnetQincome?Q-
QCORRECTQANSWERQ-NetQincomeQdoesn'tQaccountQforQtheQchangeQinQcash-

WhileQtechnicallyQtrueQ(i.e.,QnetQincomeQdoesn'tQaccountQforQtheQchangeQinQcash),QthisQisQnotQaQreasonQfo
rQtheQdifferenceQinQCFOQandQnetQincome.QNeitherQnetQincomeQnorQCFOQ"accounts"QforQtheQchangeQinQcas
h.



SupposeQaQfirmQshowsQanQincreaseQinQaccountsQreceivableQofQ$100QduringQaQperiod.QConsideredQinQisolat
ion,QwhichQofQtheQfollowQbestQdescribesQtheQimpactQofQthisQchangeQonQtheQStatementQofQCashQFlows?Q-
QCORRECTQANSWERQ-TheQchangeQwillQdecreaseQCFOQbyQ$100-

AnQincreaseQinQanQassetQaccountQindicatesQanQoutflowQofQcash.QSinceQA/RQisQanQoperatingQaccount,QtheQ$
100QincreaseQwillQdecreaseQCFOQbyQ$100.

, WhichQofQtheQfollowingQbestQdescribesQtheQsimplifiedQcalculationQofQCFO:Q-QCORRECTQANSWERQ-
CFOQ=QNIQ+QDepreciationQexpenseQ+QchangesQinQoperatingQaccounts-
CFOQisQcalculatedQforQaQsingleQperiod,QsoQweQneedQdepreciationQexpenseQforQthatQperiodQandQnotQtotalQa
ccumulatedQdepreciation.QAdditionally,QwhileQchangesQinQaccountsQreceivableQareQincludedQinQtheQcalcula
tionQofQCFOQweQneedQtoQexamineQallQoperatingQaccountsQnotQjustQthisQone.



AQchangeQinQnotesQpayableQwillQimpactQCFO.Q-QCORRECTQANSWERQ-FALSE-
AQchangeQinQnotesQpayableQwillQNOTQimpactQCFOQ(Note:QnotesQpayableQisQaQfinancingQvariable;Qhence,Qch
angesQinQnotesQpayableQimpactQCFF).



CalulatingQCFO:QRememberQthisQ-QCORRECTQANSWERQ-IncreasedQAssetsQ=QOutflowQofQCash

IncreasesQ=QanQoutflowQofQcash

DecreasesQ=QanQinflowQofQcash



WhichQofQtheQfollowingQrepresentQoperatingQassetQaccountsQconsideredQinQtheQcalculationQofQCFO?Q-
QCORRECTQANSWERQ-AccountsQreceivableQandQinventory-

AccountsQpayableQandQaccruedQwagesQareQoperatingQliabilities;QasQsuch,QtheyQareQnotQoperatingQassets.QC
ashQisQanQasset,QbutQisQnotQconsideredQinQtheQcalculationQofQCFO.



"BrightonQandQDarkTecQareQidenticalQcompanies:QbothQcompaniesQsellQcomputersQtoQidenticalQclients,Qrec
ognizeQtheQsameQamountQofQrevenue,QandQpurchasedQtheQsameQcapitalQequipmentQatQtheQsameQcostQatQt
heQbeginningQofQthisQyear.QHowever,QBrighton'sQsalesQareQ1/3QonQcreditQwhileQ2/3QofQDarkTec'sQsalesQareQ
onQcredit.QInQaddition,QwhileQbothQcompaniesQuseQstraight-
lineQdepreciation,QBrightonQcalculatesQdepreciationQofQtheQnewQequipmentQbasedQonQanQ8-
yearQusefulQlifeQwhileQDarkTecQcalculatesQdepreciationQbasedQonQ10-
yearQlifeQ(i.e.QDepreciationQExpenseQ=QCostQofQMachine/LifeQofQtheQMachine).QAssumeQbothQcompaniesQh
adQexactlyQtheQsameQbalanceQsheetsQatQtheQbeginningQofQtheQyear.QWhichQofQtheQfollowingQstatementsQis
QmostQlikelyQcorrect?Q-QCORRECTQANSWERQ-DarkTecQhasQaQhigherQnetQincomeQthanQBrighton.-

BrightonQshouldQhaveQlowerQaccountQreceivablesQthanQDarkTecQsinceQitQhasQlowerQcreditQsalesQ(andQpres
umablyQtheQsameQcollectionQrateQsinceQbothQfirmsQhaveQidenticalQclients).QThereQisQnothingQinQtheQproble
mQtoQindicateQthatQinterestQexpenseQwillQbeQdifferentQforQtheQtwoQfirms.QAllQelseQequal,QDarkTec'sQnetQinc
omeQwillQbeQhigherQbecauseQofQlowerQdepreciationQexpenseQstemmingQfromQtheQlongerQassumedQassetQli
fe.



AnQincreaseQinQinventoryQwillQdecreaseQCFO.Q-QCORRECTQANSWERQ-TRUE-
AnQincreaseQinQanQoperatingQassetQsuchQasQinventoryQrepresentsQanQoutflowQofQcashQattributableQtoQCFO.