WGU C213 PRE-ASSESSMENT ACCOUNTING FOR DECISION MAKERS PVAC EXAM QUESTIONS AND VERIFIED ANSWERS

1. What does accounting focus on? O The impact a business's activities have on its public image O The impact a business's activities have on its relationship with customers O The impact a business's activities have on the environment O The impact a business's activities have on its overall financial performance O The impact a business's activities have on its overall financial performance 2. Which report summarizes cash collections and cash expenditures from operating, investing, and financing activities over a period of time? O Statement of Cash Flows O Cash flow schedule O Summary of cash receipts O Cash receipts and disbursements O Statement of Cash Flows 3. Which users would have a primary concern with an organization's ability to provide healthcare benefits? O Suppliers O Employees O Vendors O Competitors O Employees 4. Which benefit does a corporation gain by following Generally Accepted Accounting Principals (GAAP)? O An increase in the amount of assets it reports O A decrease in its income tax obligations O A decrease in the amount of net income it reports O An increase in its comparability to other companies O An increase in its comparability to other companies 5. Which body regulates a certified public accounting firm's audit practices when the firm is auditing a large publicly traded company? O Another certified accounting firm (CPA) O The Public Company Accounting Oversight Board (PCAOB) O The internal revenue service (IRS) O The financial accounting standards board (FASB) O The Public Company Accounting Oversight Board (PCAOB) 6. What has had the most significant impact on accounting practices? O New product innovations O Mobile computing O Certification requirements O Information Technology O Information Technology 7. What two items of information are revealed on the balance sheet? Choose 2 answers O Costs O Revenues O Debt O Expenses O Ownership O Debt O Ownership 8. Which term is defined as the residual interest in the net assets of a company? O Owner's Equity O Revenues O Operating Income O Liabilities O Owner's Equity 9. A corporation has total liabilities of $300 million, total owners' equity of $100 million, and current assets of $50 million. What is the value of the firm's long-term assets? O $250 million O $350 million O $400 million O $450 million Assets = Liabilities + Equity x + 50m = 300m + 100m Solving for x = 350m O $350 million 10. Which situation should result in revenue recognition on the income statement for the year ending 12/31/14 if the firm is using accrual-basis accounting? O In 2014, a company collects cash from a customer for services it will provide next year (2015) O In 2014, a company collects cash from a customer for services it provided in the previous year (2013) O In 2014, a company enters into a contract whereby it agrees to provide services to a customer next year in (2015) O In 2014, a company provide services to a customer for cash will be collected the next year (2015) O In 2014, a company provide services to a customer for cash will be collected the next year (2015) 11. Which category on the statement of cash flows summarizes cash receipts and payments to owners and creditors of the company? O Cash flows from business activities O Cash flows from financing activities O Cash flows from investing activities O Cash flows from operating activities O Cash flows from financing activities 12. Where would an investor find a summary of a company's significant accounting policies? O In the income statement O In the balance sheet O In the statement of cash flows O In the notes to financial statement O In the notes to financial statement 13. Which assurance does an external audit report provide for its readers? O The company will be a good credit risk O The company's financial statement fairly reflecst it financial position O The company will generate positive cash flows O The company will generate net income O The company's financial statement fairly reflects it financial position 14. Match each accounting term with its definition. Answer options may be used more than once or not at all. Conservatism Material Reliable Relevant Information having to do with the matter at hand Information related to recognizing losses as they occur Information that can be verified Information that is important enough to make a difference Conservatism: Information related to recognizing losses as they occur Material: Information that is important enough to make a difference Reliable: Information that can be verified Relevant: Information having to do with the matter at hand 15. Order the steps in the decision cycle from first (1) to last (5). -Analyze financial statements -Gather information -Implement decision -Make decision -Prepare financial statements 1. Prepare financial statements 2. Analyze financial statements 3. Gather information 4. Make decision 5. Implement decision 16. Partial financial information for a company is as follows: Current assets $36,543 Total assets $58,719 Current liabilities $24,824 Total liabilities $48,561 Stockholders' equity $10,158 Sales $46,997 Net Income $ 3,761 Market value of shares $41,316 What is the price-earnings (PE) ratio for this company? O 11.0 O 12.5 O 12.9 O 15.6 O 11.0 17. What does it mean if a company has a debt ratio of 101.5% O The company has 1.5% more current liabilities than current assets O The company has 1.5% more total liabilities than total assets O The company has 1.5% more total liabilities than net income O The company has 1.5% more total liabilities than gross sales O The company has 1.5% more total liabilities than total assets 18. What is consistent with a continual decline in gross profit if the firm's cost of goods sold remains the same? O Continual increase in taxes O Continual increase in interest O Continual decrease in salaries O Continual decrease in sales O Continual decrease in sales 19. Which two cash flow adequacy ratios represent a cash cow? Choose 2 O $6,991/$5,486 O $4,510/$4,932 O $7,589/$9,210 O $5,220/$1,875 O $8,091/$9,374 $6,991/$5,486. $5,220/$1,875. Which formula yields a cash times interest earned ratio of 11? O Cash before interest and taxes of $11,000 / cash paid for acquisitions of $1,000. O Cash before interest and taxes of $11,000 / cash paid for income taxes of $1,000. O Cash before interest and taxes of $11,000 / cash from operations of $1,000. O Cash before interest and taxes of $11,000 / cash paid for interest of $1,000. O Cash before interest and taxes of $11,000 / cash paid for interest of $1,000. Which form of debt should be reported in the long-term liability category? O Accounts payable due in 30 days O Salaries payable due in 2 weeks O Unearned revenue that will be earned in 9 months O Notes payable expected to be paid in 18 months O Notes payable expected to be paid in 18 months 22. In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, the following events occurred: January 1 The corporation received $1,000,000 in cash in exchange for stock issued to stockholders. January 3 The corporation borrowed $250,000 from bank. The loan is a four-year loan with an interest rate of 12 percent, payable each year on January 1 beginning in year 2. January 5 The corporation purchased equipment to be used in the business for $200,000 cash. January 8 The corporation purchased inventory costing $200,000 by paying $120,000 in cash. The remainder was put on credit accounts with suppliers. January 15 The corporation hired five employees. Each employee will be paid $1,000 at the end of each month. January 30 The corporation paid $6,000 cash for a one-year insurance policy. The policy period will begin on February 1, year 1. What will be the impact of the January 5 event on the company's balance sheet on that date? O Cash will decrease $200,000, and loan payable will decrease $200,00 O Equipment will increase $200,000, and cash will decrease $200,000. O Cash will decrease $200,000, and paid-in-capital will decrease $200,000. O Equipment will increase $200,000, and retained earnings will decrease $200,000. O Equipment will increase $200,000, and cash will decrease $200,000. 23. In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, the following events occurred: January 1 The corporation received $1,000,000 in cash in exchange for stock issued to stockholders. January 3 The corporation borrowed $250,000 from a bank. The loan is a four-year loan with an interest rate of 12 percent, payable each year on January 1 beginning in year 2. January 5 The corporation purchased equipment to be used in the business for $200,000 cash. January 8 The corporation purchased inventory costing $200,000 by paying $120,000 in cash. The remainder was put on credit accounts with suppliers. January 15 The corporation hired five employees. Each employee will be paid $1,000 at the end of each month. January 31 The corporation paid $6,000 cash for a one-year insurance policy. The policy period will begin on February 1, year 1. What will be the impact of the January 31 event on the company's balance sheet on that date? O Cash will decrease $6,000, and accounts receivable will increase $6,000. O Prepaid insurance will decrease $6,000, and accounts payable will decrease $6,000. O Cash will decrease $6,000, and paid-in capital will decrease $6,000. O Prepaid insurance will increase $6,000, and cash will decrease $6,000. O Prepaid insurance will increase $6,000, and cash will decrease $6,000. 24. Which two values affect the measurement of net income? Choose 2 answers O Operating expenses O Dividends paid O Ordinary gains and losses O Stockholder contributions O Operating expenses O Ordinary gains and losses 25. Which two items' subtotals are included in a multi-step income statement? Choose 2 answers O Total assets O Gross profit O Current liabilities O Income from operations O Gross profit O Income from operations 26. A furniture company using accrual accounting purchased 20 sofas in November 2011. In December 2011, 8 of the 20 sofas were sold to customers. The customers all signed contracts agreeing to pay half the amount owed in February 2012 and the remaining half in March 2012. At the time of sale, the company was reasonably sure the customers would pay the amount owed. The furniture company pays its salespeople a commission on each sofa sold, with commissions for December 2011 sales paid in January 2012. The furniture company paid $3,000 for advertising that ran in the local newspaper in November 2011. In which month should advertising costs be expensed? O February 2012 O January 2012 O December 2011 O November 2011 O November 2011 27. On May 1, 2011, a company using accrual accounting purchased equipment costing $500,000. It expects the equipment to have a useful life of five years. At the time of purchase, the company also purchased a one-year insurance policy on this equipment, which cost $6,000. How much insurance expense should the company have recognized for the year ending in 2011? O $3,000 O $4,000 O $6,000 O $8,000 O $4,000 28. In January of year 1, a company began doing business as a corporation in order to sell technology-related accessories and services. During its first month of operations, it focused on obtaining the financing needed to start its operations. In February of year 1, the company sold inventory costing $25,000 for $75,000 cash. In February of year 1, the company provided technology-related services worth $10,000. Customers paid a total of $4,000 in cash for these services and promised to pay the remainder the following month. What will be the total impact of these services provided on the company's balance sheet other than an increase in cash of $4,000? Choose 2 answers O Retained earnings will increase $6,000. O Accounts receivable will decrease $6,000. O Retained earnings will increase $10,000. O Accounts receivable will increase $6,000. O Retained earnings will decrease 52,000. O Retained earnings will increase $10,000. O Accounts receivable will increase $6,000. 29. What was the 2012 net profit amount if the 2013 pro-forma net profit of $187,000 was based on a 22% increase? O $228,140 O $182,975 O $153,279 O $145,860 O $153,279 30. What is a common category in a statement of cash flows? O Cash from marketing activities O Cash from planning activities O Cash from investing activities O Cash from production activities O Cash from investing activities 31. Which cash flow category would include "cash received from investors"? O Cash from financing activities O Cash from sponsoring activities O Cash from charitable activities O Cash from investing activities O Cash from financing activities 32. Which item is an investing activity? O Cash receipts from dividend revenue O Cash receipts from issuance of stock O Cash payments for dividends O Cash payments for purchase of plant assets O Cash payments for purchase of plant assets