WGU C213 Accounting for Decision Makers Final Exam Questions and Verified Answers 2025

Which of the following is NOT true of the Financial Accounting Standards Board (FASB)? - It is a government agency THEY DO: It consists of seven full-time members It seeks consistency for its proposed standards It has no legal power to enforce the standards it sets Generally accepted accounting principles are - Developed by accounting rule makers The initials GAAP stand for - Generally Accepted Accounting Principles The current standard-setting board for accounting in the private sector is the - Financial Accounting Standards Board (FASB) The emphasis in financial accounting is on which of the following external user groups? - Investors and creditors The primary internal group that uses accounting information is - Management Internal reports are generally used by - Management Which of the following is NOT an external user of financial information? - Management Standards established by the International Accounting Standards Board are referred to as - International Financial Reporting Standards Which of the following is the government agency that stipulates the rules and regulations that govern the collection of taxes in the United States? - Internal Revenue Service Which of the following is NOT a service typically provided by large public accounting firms? - Making management decisions They DO: Performing audits Establishing accounting systems Redesigning operating procedures The initials CPA stand for - Certified Public Accountant Which of the following organizations has specific legal authority to establish accounting standards for publicly held companies? - Securities and Exchange Commission (SEC) Which of the following is NOT a reason for the integration of worldwide accounting standards? - the increased efficiency of financial markets NOT the integration of the global economy the theoretical necessity of a common set of accounting standards the need to evaluate investments across the world The International Accounting Standards Board (IASB) is charged with developing worldwide accounting practices? - True With the current state of information technology, investors outside a company are now allowed access to a company's internal database of financial information and do their own customized analysis of a firm's performance. - False Increased federal oversight of the audit process resulted from the passage of the following act of Congress - Sarbanes-Oxley Act A borrower benefits from providing financial information regarding income and expenses in the form of a lower interest rate on the loan because of reduced uncertainty for the lender with regard to repayment. - True Which of the following is NOT one of the three primary financial statements? - The Statement of Retained Earnings THEY ARE: The Balance Sheet The Statement of Cash Flows The Income Statement One reason for a company's preparing and providing financial statements is to reduce uncertainty for an investor regarding the firm's future financial performance. - True Which of the following types of accounts are NOT found on the balance sheet? - Revenues THEY ARE Assets Liabilities Owners' equity Another name for the balance sheet is the - Statement of financial position Which of the following distinguishes between current and long-term assets? - Classified balance sheet The basic accounting equation is - Assets = Liabilities + Owners' Equity The idea that businesses must be accounted for as though they will exist at least for the foreseeable future is the - Going concern concept Expenses generally cause - A decrease in net assets Which of the following is an overall measure of the performance of a business entity's activities? - Net income (or net loss) Costs that are incurred during the normal operations of a business to generate revenues are called - Expenses The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or a year, is called a(n) - Income statement Another name for the income statement is - Statement of earnings Revenues cause - An increase in net assets Which of the following would be included on an income statement? - Rent expense Expense and revenue accounts appear on the - Income statement What will increase from the sale of goods or services? - Revenues Which of the following financial statements shows an entity's cash receipts and payments? - The statement of cash flows Which of the following classifications does NOT appear on the Statement of Cash Flows? - Borrowing DOES APPEAR: Financing Operating Investing Vital information that CANNOT be captured solely by dollar amounts is reported in a firm's - Notes to financial statements Which of the following is NOT one of the four general types of financial statement notes? - Supplementary information required by the Internal Revenue Service Which of the following is an example of a significant accounting policy that would be explained in the notes to the financial statements? - The method used to estimate depreciation on a piece of equipment Which of the following is an example of a disclosure of information NOT recognized that would be explained in the notes to the financial statements? - The disclosure of the uncertain, potential outcome of a lawsuit Which of the following is an example of additional information about summary totals that would be explained in the notes to the financial statements? - The description of all the individual items that comprise notes payable An independent audit report is usually issued by - A certified public accountant In completing an audit of a company's financial statements, auditors - Provide some assurance that the financial statements are not misleading The accuracy of the information contained in the financial statements is the responsibility of the - Management Which of the following are the two economic factors that enable us to trust an independent auditor despite the fact that the auditor was hired by the company being audited? - Reputation of auditor and risk of lawsuits The idea that certain figures on an operating statement help to explain changes in figures on comparative balance sheets is referred to as - Articulation The idea that information becomes more useful when it can be related to a benchmark or a standard is referred to as - Comparability The notion that when doubt exists concerning two or more reporting alternatives, users should select the alternative with the least favorable impact on reported income, assets, and liabilities is referred to as - Conservatism Whether an item is big enough that proper accounting will make a difference to users of accounting information is referred to as - Materiality The notion that information will be more useful if it will impact a decision is referred to as - Relevance Which of the following usually is NOT considered to be an owners' equity account? - Inventory Owners of a corporation are referred to as - Stockholders Which of the following is generally considered to be a liability? - Notes payable Current assets usually are listed on a balance sheet in - Decreasing order of liquidity Which of the following accounts would NOT be considered a current asset? - Equipment In non-U.S. Balance sheets, you will often see each of the following EXCEPT: - The stockholders' equity section will be listed first on the balance sheet Reporting the details of a transaction in the notes to the financial statements is called - Disclosure The process of determining the dollar value to assign to an item that is to be recognized in the financial statements is called - Valuation The process of determining the dollar value to assign to an item that is to be recognized in the financial statements is called - Relevant and reliable Historical cost has long been used in accounting because it is - Reliable This is sometimes done in place of recognition when the effects of an event cannot be quantified with any degree of certainty. - Disclosure When an investor pays cash into a business to become a part owner, the effect on the accounting equation for the business will be to - Increase Cash and increase Paid-in Capital When a company pays for a warehouse by paying cash, the effect on the accounting equation will be to - Increase Buildings and decrease Cash When a company rents a warehouse by paying for the first six month's rent in advance, the effect on the accounting equation on the day of payment would be to - Increase Prepaid Rent and decrease Cash When a company borrows money from a bank to be repaid in over time, the effect on the accounting equation for the company will be to - Increase Cash and increase Bank Loan Payable When a company purchases equipment on credit, the effect on the accounting equation will be to - Increase Equipment and increase a liability A company's asset mix is determined by - Dividing each asset item on the balance sheet by total assets A company's asset mix is strongly influence by - The company's industry Financing mix is a measure of - The degree to which a company finances assets using liabilities or owners' equity The concept that income is defined as the excess of net assets at the end of an accounting period over the net assets at the beginning of the accounting period, excluding effect of transactions with owners is called - - Financial capital maintenance A measure of a company's performance that is intended to summarize in one number the overall economic performance of a company in a given period is - - Net Income A measure of a company's performance that includes all items that are expected to continue into the future is - - Income from Continuing Operations The difference between the selling price of the product and the cost of the product - Gross Profit ____ measures the performance of the fundamental business operations conducted by a company and is computed as gross profit minus operating expenses. A general rule of thumb is that all expenses are ____ expenses except interest expense and income tax expense. Accordingly, another name for ____ is EBIT, or earnings before interest and taxes. - Operating income Computed by subtracting interest expense, income tax expense, and other miscellaneous items from operating income. ____ is significant because of the two categories of items that it excludes: Income from Discontinued Operations and Extraordinary Gains and Losses - Income from continuing operations The accountant's attempt to summarize in one number the overall economic performance of a company for a given period. Because ____ is an overall summary number, it includes items from the two "belowthe- line" categories mentioned above. In the absence of any irregular items, ____ is the same as income from continuing operations. - Net income ____ is the number used to reflect an overall measure of the change in a company's wealth during the period. In addition to net income, ____ includes items that, in general, arise from changes in market conditions unrelated to the business operations of a company. The most common of these items are: Changes from translating financial statements of non-U.S. subsidiaries into U.S. dollars, caused by changes in foreign currency exchange rates Changes in the value of investment securities that are not held for active trading purposes Changes in the value of certain derivative instruments - Comprehensive income If a company has $528,000 of sales revenue, pays $26,400 in dividends, and has net income of $158,400, how much were the expenses for the year? - Correct Answer: $369,600 Expenses: $528,000 - $158,400 = $369,600 The following information was taken from the records of Tellers Corporation for the month ended December 31, 2012: Advertising expense $20,625 Income tax expense 13,095 Accounts payable 13,450 Dividends paid 14,125 Retained earnings (12/1/12) 57,860 Consulting fees revenue 93,550 Rent expense 11,728 Supplies expense 16,917 Given the above information, net income is - Correct Answer: $31,185 Net income: $93,550 - $20,625 - $13,095 - $11,728 - $16,917 = $31,185 The following information was taken from the records of Merle Corporation for the period ending December 31, 2012: Advertising expense $1,200 Equipment 800 Accounts receivable 1,500 Notes payable 6,000 Retained earnings 8,420 Utilities expense 1,385 Revenues 4,620 Dividends 975 Interest receivable 125 Rent expense 655 Assuming that 3,450 shares of stock are outstanding, earnings per share is approximately - Correct Answer: $0.40 Net income: $4,620 - $1,200 - $1,385 - $655 = $1,380 Earnings per share: $1,380 / 3,450 shares = $0.40 Which of the following is a revenue generating activity? - Selling a product Which of the following is the correct way to date an income statement? - For the Year Ended December 31, 2012 Earnings per share is equal to - Earnings per share is equal to When a company determines to get out of a specific line of business - Revenues and expenses from that line of business are excluded from the company's recurring revenues and expenses when preparing an income statement. For a gain or loss to be classified as extraordinary, it must be - Both unusual and infrequent The following information was taken from the records of Tellers Corporation for the month ended December 31, 2012: Advertising expense $20,625 Income tax expense 13,095 Accounts payable 13,450 Dividends paid 14,125 Retained earnings (12/1/12) 57,860 Consulting fees revenue 93,550 Rent expense 11,728 Supplies expense 16,917 If Tellers has 2,100 shares of stock outstanding, earnings per share is approximately - Correct Answer: $14.85 Net income: $93,550 - $20,625 - $13,095 - $11,728 - $16,917 = $31,185 Earnings per share: $31,185 / 2,100 shares = $14.85 The following information was taken from the records of McDyce Corporation for the year ended December 31, 2013: Dividends paid $ 12,800 Service revenue 90,500 Accounts payable 139,750 Capital stock 378,750 Total expenses 67,000 Retained earnings (1/1/13) 43,400 The net income at December 31, 2013 was - Correct Answer: $23,500 Net income: $90,500 - $67,000 = $23,500 When revenue and expense items are arranged to highlight important profit relationships, the resulting income statement format is called a - Multiple-step income statement Income statement all revenues are grouped together, all expenses are grouped together, and net income is computed as the difference between the two in what is known as a ____ - Single step income statement The revenue principle states that revenue should be recognized at a point when: - An exchange transaction involving goods and services has occurred and the earnings process is essentially complete. Which of the following principles best describes the rationale for matching administrative and selling expenses with revenues of the current period? - Immediate recognition A wholesale bakery would normally recognize revenue when - Goods are delivered to the customer. Generally, recognition criteria are met and revenues are recognized: - At the point of sale. Costs that can be reasonably associated with specific revenues but NOT with specific products should be - Expensed in the period in which the related revenue is recognized. An example of direct matching of an expense with revenues would be: - Direct labor costs incurred to produce inventory sold during a period. Which of the following categories of expenses is subject to immediate recognition on the income statement? - The salary of the company president Under the general rule of revenue recognition, revenue is recognized when: - The earnings process is complete, and a valid promise of payment has been received. Analysis of revenue and expense transactions requires the use of the: - Expanded Accounting Equation Thus far, the only national government to adopt the accrual basis for its official accounting system is ______. - New Zealand Which of the following statements is true regarding retained earnings? - Increasing revenues will increase retained earnings Increasing expenses will decrease retained earnings Increasing dividends will decrease retained earnings All of the statements are true ______ is/are not considered to be an expense of doing business. - Cash dividends ____ is increased and ____ is decreased when cash is collected from customers who had previously purchased a product or service on account. - Cash, Accounts Receivable Most forecasting exercises begin with a forecast of - Sales If a company anticipates a 40% increase in sales volume, then it is most likely that the company will need about a 40% increase in - Accounts payable The statement of cash flows replaces the - None of these: Balance sheet Statement of financial position Income statement The statement of cash flows - Summarizes all cash inflows and outflows of an entity for a given period of time Which of the following is NOT a purpose of the statement of cash flows? - It measures the profitability of an entity. Which of the following statements is NOT true? - The statement of cash flows includes transactions that are not already reflected in the balance sheet and income statement. Which of the following would be reported as an operating activity on a statement of cash flows? - Payment of taxes Which of the following is the typical sequencing of activities on the statement of cash flows? - Operating, investing, and financing Which of the following would NOT be reported as an investing activity on a statement of cash flows? - Amounts borrowed An investing activity WOULD be: Extending loans to other entities Sale of a building Collection of a long-term note receivable Which of the following would be classified as an operating activity on a statement of cash flows? - Cash received as dividends on investments Which of the following would be classified as an investing activity on a statement of cash flows? - Cash received from the sale of a land What type of activities are these? Sales receipts Collections on account receivables Wage and salary payments Dividend receipts Receipt of interest revenue Payments for inventory Paid interest on debt Paid miscellaneous expenses Paid income taxes - Operating What types of activities are these? Bought PP&E Sold PPE&E - Investing What types of activities are these? Repaid long-term debt Issued stock - Financing Avondale Inc. had the following cash transactions during 2012: Sales receipts $2,000,000 Inventory payments 1,500,000 Interest payments 20,000 Wage payments 120,000 Dividend receipts 10,000 Interest receipts 6,000 Equipment purchased 150,000 Stock of Canton Company purchased 50,000 Stock issued 300,000 Repaid a note (nonoperating) 100,000 What was Avondale's total net increase in cash for the year provided by (used in) financing activities? - Correct Answer: $200,000 Cash provided by financing activities: $300,000 - $100,000 = $200,000 Hee Jung Company had the following information available: Collections on accounts receivable $53,200 Payments for equipment purchase $23,200 Payments for wages and salaries $18,000 Receipt of interest revenue $ 2,500 Payments to principal amount on loan $12,800 Payments for inventory $22,200 Using this information, compute Hee Jung's cash provided by (paid for) operating activities. - Correct Answer: $15,500 Operating activities: $53,200 - $18,000 + $2,500 - $22,200 = $15,500 The following financial information is available for the year 2012: Operating activities $ 309,800 Investing activities ($118,000) Financing activities ($190,000) Ending cash balance $ 5,600 Given this information, what is the beginning cash balance? - Correct Answer: $3,800 Beginning cash balance: x + $309,800 - $118,000 - $190,000 = $5,600 x = $3,800 Avondale Inc. had the following cash transactions during 2012: Sales receipts $2,000,000 Inventory payments 1,500,000 Interest payments 20,000 Wage payments 120,000 Dividend receipts 10,000 Interest receipts 6,000 Equipment purchased 150,000 Stock of Canton Company purchased 50,000 Stock issued 300,000 Repaid a note (nonoperating) 100,000 What was Avondale's net increase in cash for the year? - Correct Answer: $376,000 Net increase in cash: $2,000,000 - $1,500,000 - $20,000 - $120,000 + $10,000 + $6,000 - $150,000 - $50,000 + $300,000 - $100,000 = $376,000 Avondale Inc. had the following cash transactions during 2012: Sales receipts $2,000,000 Inventory payments 1,500,000 Interest payments 20,000 Wage payments 120,000 Dividend receipts 10,000 Interest receipts 6,000 Equipment purchased 150,000 Stock of Canton Company purchased 50,000 Stock issued 300,000 Repaid a note (nonoperating) 100,000 What was Avondale's net cash provided by (used in) operating activities? - Correct Answer: $376,000 Cash provided by operating activities: $2,000,000 - $1,500,000 - $20,000 - $120,000 + $10,000 + $6,000 = $376,000 Which of the following would be subtracted from net income on a statement of cash flows prepared by the indirect method? - A gain from the sale of equipment