WGU C213 Accounting for Decision Makers Exam Questions and Answers ()
WGU C213 Accounting for Decision Makers Exam
Questions and Answers () – 100%
Verified Original Copy
Question 1: What is the primary purpose of financial accounting?
A. Budgeting for internal operations
B. Reporting financial performance to external stakeholders
C. Setting employee compensation
D. Forecasting market trends
Answer: B
Explanation: Financial accounting prepares standardized financial statements for
external users, such as investors and creditors, to assess the company’s financial
health and performance.
Question 2: Which financial statement reports a company’s financial position at a specific point
in time?
A. Income statement
B. Balance sheet
C. Statement of cash flows
D. Statement of retained earnings
Answer: B
Explanation: The balance sheet provides a snapshot of assets, liabilities, and
equity at a given date, reflecting the company’s financial position.
Question 3: A company has $500,000 in assets and $200,000 in liabilities. What is the equity?
A. $200,000
B. $300,000
C. $400,000
D. $500,000
Answer: B
Explanation: Using the accounting equation (Assets = Liabilities + Equity),
Equity = Assets - Liabilities = $500,000 - $200,000 = $300,000.
Question 4: Which principle requires expenses to be recognized in the same period as the rev-
enues they help generate?
A. Materiality
B. Matching
C. Conservatism
D. Consistency
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, WGU C213 Accounting for Decision Makers Exam Questions and Answers ()
Answer: B
Explanation: The matching principle ensures that expenses are recorded in the
same period as the related revenues to accurately reflect profitability.
Question 5: Sales are $300,000, cost of goods sold is $180,000, and operating expenses are
$60,000. What is the operating income?
A. $60,000
B. $120,000
C. $180,000
D. $240,000
Answer: A
Explanation: Operating income = Sales - Cost of goods sold - Operating expenses
= $300,000 - $180,000 - $60,000 = $60,000.
Question 6: Which activity is classified as a financing activity in the statement of cash flows?
A. Purchasing inventory
B. Issuing common stock
C. Selling equipment
D. Paying salaries
Answer: B
Explanation: Financing activities involve transactions with owners or creditors,
such as issuing stock or paying dividends.
Question 7: What is the current ratio if current assets are $150,000 and current liabilities are
$50,000?
A. 0.33
B. 1.0
C. 3.0
D. 5.0
Answer: C
Explanation: Current ratio = Current assets ÷ Current liabilities = $150,000 ÷
$50,000 = 3.0, indicating the ability to cover short-term obligations.
Question 8: A company pays $6,000 for a 2-year insurance policy. How much expense is recog-
nized in the first year?
A. $2,000
B. $3,000
C. $4,000
D. $6,000
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, WGU C213 Accounting for Decision Makers Exam Questions and Answers ()
Answer: B
Explanation: The expense is allocated over the policy term: $6,000 ÷ 2 years =
$3,000 per year, recorded as insurance expense in the first year.
Question 9: Which of the following is a variable cost?
A. Rent
B. Direct materials
C. Depreciation
D. Property taxes
Answer: B
Explanation: Variable costs, like direct materials, vary with production volume,
unlike fixed costs such as rent or depreciation.
Question 10: What does a high debt-to-equity ratio indicate?
A. Low financial leverage
B. High reliance on debt financing
C. Strong liquidity
D. High profitability
Answer: B
Explanation: A high debt-to-equity ratio (total liabilities ÷ total equity) suggests
greater reliance on borrowed funds, increasing financial risk.
Question 11: Which costing method is best suited for custom furniture production?
A. Process costing
B. Job order costing
C. Activity-based costing
D. Standard costing
Answer: B
Explanation: Job order costing tracks costs for unique, custom orders, such as
furniture, ensuring accurate cost allocation.
Question 12: A company’s net income is $40,000, and dividends paid are $15,000. What is the
change in retained earnings?
A. $15,000
B. $25,000
C. $40,000
D. $55,000
Answer: B
Explanation: Change in retained earnings = Net income - Dividends = $40,000 -
$15,000 = $25,000.
3
WGU C213 Accounting for Decision Makers Exam
Questions and Answers () – 100%
Verified Original Copy
Question 1: What is the primary purpose of financial accounting?
A. Budgeting for internal operations
B. Reporting financial performance to external stakeholders
C. Setting employee compensation
D. Forecasting market trends
Answer: B
Explanation: Financial accounting prepares standardized financial statements for
external users, such as investors and creditors, to assess the company’s financial
health and performance.
Question 2: Which financial statement reports a company’s financial position at a specific point
in time?
A. Income statement
B. Balance sheet
C. Statement of cash flows
D. Statement of retained earnings
Answer: B
Explanation: The balance sheet provides a snapshot of assets, liabilities, and
equity at a given date, reflecting the company’s financial position.
Question 3: A company has $500,000 in assets and $200,000 in liabilities. What is the equity?
A. $200,000
B. $300,000
C. $400,000
D. $500,000
Answer: B
Explanation: Using the accounting equation (Assets = Liabilities + Equity),
Equity = Assets - Liabilities = $500,000 - $200,000 = $300,000.
Question 4: Which principle requires expenses to be recognized in the same period as the rev-
enues they help generate?
A. Materiality
B. Matching
C. Conservatism
D. Consistency
1
, WGU C213 Accounting for Decision Makers Exam Questions and Answers ()
Answer: B
Explanation: The matching principle ensures that expenses are recorded in the
same period as the related revenues to accurately reflect profitability.
Question 5: Sales are $300,000, cost of goods sold is $180,000, and operating expenses are
$60,000. What is the operating income?
A. $60,000
B. $120,000
C. $180,000
D. $240,000
Answer: A
Explanation: Operating income = Sales - Cost of goods sold - Operating expenses
= $300,000 - $180,000 - $60,000 = $60,000.
Question 6: Which activity is classified as a financing activity in the statement of cash flows?
A. Purchasing inventory
B. Issuing common stock
C. Selling equipment
D. Paying salaries
Answer: B
Explanation: Financing activities involve transactions with owners or creditors,
such as issuing stock or paying dividends.
Question 7: What is the current ratio if current assets are $150,000 and current liabilities are
$50,000?
A. 0.33
B. 1.0
C. 3.0
D. 5.0
Answer: C
Explanation: Current ratio = Current assets ÷ Current liabilities = $150,000 ÷
$50,000 = 3.0, indicating the ability to cover short-term obligations.
Question 8: A company pays $6,000 for a 2-year insurance policy. How much expense is recog-
nized in the first year?
A. $2,000
B. $3,000
C. $4,000
D. $6,000
2
, WGU C213 Accounting for Decision Makers Exam Questions and Answers ()
Answer: B
Explanation: The expense is allocated over the policy term: $6,000 ÷ 2 years =
$3,000 per year, recorded as insurance expense in the first year.
Question 9: Which of the following is a variable cost?
A. Rent
B. Direct materials
C. Depreciation
D. Property taxes
Answer: B
Explanation: Variable costs, like direct materials, vary with production volume,
unlike fixed costs such as rent or depreciation.
Question 10: What does a high debt-to-equity ratio indicate?
A. Low financial leverage
B. High reliance on debt financing
C. Strong liquidity
D. High profitability
Answer: B
Explanation: A high debt-to-equity ratio (total liabilities ÷ total equity) suggests
greater reliance on borrowed funds, increasing financial risk.
Question 11: Which costing method is best suited for custom furniture production?
A. Process costing
B. Job order costing
C. Activity-based costing
D. Standard costing
Answer: B
Explanation: Job order costing tracks costs for unique, custom orders, such as
furniture, ensuring accurate cost allocation.
Question 12: A company’s net income is $40,000, and dividends paid are $15,000. What is the
change in retained earnings?
A. $15,000
B. $25,000
C. $40,000
D. $55,000
Answer: B
Explanation: Change in retained earnings = Net income - Dividends = $40,000 -
$15,000 = $25,000.
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