WGU C213 Accounting For Decision Makers Exam Questions and Verified Answers 2025

The emphasis in financial accounting is on which of the following external user groups? Educators CPA's Investors and Creditors Management - Investors and creditors The primary internal group that uses accounting information is: Investors Competitors Government Agencies Management - Management Internal Reports are generally used by: Employees Management Suppliers Lenders - Management Which of the following is NOT true of the FASB? It is a government agency It seeks consistency for its proposed standards It consists of 7 full time members It has no legal power to enforce the standards it sets - It is a government agency Generally Accepted Accounting Principles (GAAP) are: Natural laws Based on scientific proofs Developed by accounting rule makers None of the above - Developed by accounting rule makers GAAP stands for what? - Generally Accepted Accounting Principles The current standard setting board for accounting in the private sector is the: AAA FASB IASB SEC - FASB (Financial Accounting Standards Board) Which of the following is the government agency that stipulates the rules and regulations that govern the collection of taxes in the USA? SEC FASB AICPA IRS - IRS (Internal Revenue Service) Which of the following organizations has specific LEGAL authority to establish accounting standards for publicly held companies? FASB AICPA IRS SEC - SEC (Securities and Exchange Commission) The Organization that develops worldwide accounting standards is the: IASC IBAS ICAS IASB - IASB (International Accounting Standards Board) Which of the following is NOT a service typically provided by large public accounting firms? Making management decisions Establishing accounting systems Redesigning operating procedures Performing audits - Making management decisions CPA stands for: - certified public accountant Which of the following is NOT a reason for the integration of worldwide accounting standards? the theoretical necessity of a common set of accounting standards The integration of the global economy The increased efficiency of financial markets The need to evaluate investments across the world - The theoretical necessity of a common set of accounting standards TRUE or FALSE: the IASB is charged with developing worldwide accounting practices? - True Increased federal oversight of the audit process resulted from the passage of the following act of Congress - Sarbanes-Oxley Act Financial Reports Act Access to High Standards Act AGOA Acceleration Act - Sarbanes-Oxley Act TRUE or FALSE: 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 3 primary financial statements? Statement of retained earnings Balance sheet Statement of cash flow Income statement - Statement of retained earnings TRUE or FALSE: One reason for a company's preparing and providing financial statements is to reduce uncertainty for an investor regarding the firms future financial performance - True Basic Accounting Equation - Assets = Liabilities + Owner's Equity Which of the following provides a picture of the enterprise at a particular point in time? Income statement Statement of cash flows Balance sheet Statement of retained earnings - Balance sheet The financial statement that reports resources owned, the obligations to transfer resources to other organizations, and the claims by the entity's owners is known as the: Income statement Statement of retained earnings Statement of cash flows Balance sheet - Balance sheet Why is the accounting equation is true? - Liabilities and owner's equity are the sources that fund the purchase of assets Which of the following distinguishes between current and long term assets? - Classified balance sheet Which of the following would be included on an income statement? Accounts receivable Land Cash Rent expense - Rent expense Revenues cause: An increase in liabilities A decrease in net assets No change in net assets An increase in net assets - An increase in net assets Another name for the income statement is: Retained earnings statement Statement of cash flows Statement of earnings Statement of financial position - Statement of earnings Which of the following is an overall measure of the performance of a business entity's activities? Owners equity Assets Net income/Net loss Revenues - Net income/Net loss Expense and revenue accounts appear on the: Income statement Retained earnings statement Balance sheet Funds statement - Income statement During the month, Meridian Company had the following cash transactions: Cash collected from customers $ 12,500 Cash received from a loan 8,000 Cash paid for wages payable (5,750) Cash paid for the purchase of a building (15,000) Cash received for the issuance of new shares of stock 2,600 Cash received from sale of land 6,400 Cash paid for rent (2,500) Cash paid for dividends (1,500) Given the above information, compute cash flow from investing activities. $4,250 $8,600 ($8,600) ($4,250) - ($8,600) Investing activities: ($15,000) + $6,400 = ($8,600) Which of the following activities would be classified as a financial activity? Selling goods Purchase of equipment Repayment of a loan Payment of wages - Repayment of a loan Which of the following classifications does NOT appear on the Statement of Cash Flows? Borrowing Investing Financing Operating - Borrowing Which of the following classifications refers to those activities associated with buying and selling long-term assets? Financing Borrowing Operating Investing - Investing A major source of cash from operating activities is: Receipts from sale of building Receipts from borrowing Receipts from investment by owner Receipts from sale of goods - Receipts from sale of goods Vital information that CANNOT be captured solely by dollar amounts is reported in a firm's: Balance sheet Income statement Statement of retained earnings Notes to financial statements - Notes to financial statement Which of the following is NOT one of the four general types of financial statement notes? Summary of significant accounting policies Disclosure of important information that is not recognized in the financial statements Supplementary information required by the Internal Revenue Service Additional information about the summary totals found in the financial statements - 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 disclosure of the uncertain, potential outcome of a lawsuit The description of all the individual items that comprise notes payable The disclosure of quarterly financial information The method used to estimate depreciation on a piece of equipment - 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 method used to estimate depreciation on a piece of equipment The disclosure of the uncertain, potential outcome of a lawsuit The disclosure of quarterly financial information The description of all the individual items that comprise notes payable - 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 method used to estimate depreciation on a piece of equipment The disclosure of quarterly financial information The disclosure of the uncertain, potential outcome of a lawsuit The description of all the individual items that comprise notes payable - The description of all the individual items that comprise notes payable An independent audit report is usually issued by: A CPA Management Government agency Private detective - CPA In completing an audit of a company's financial statements, auditors: Provide some assurance that the financial statements are not misleading Assume responsibility for the accuracy of the financial statements Examine every transaction underlying the financial statements Guarantee that the financial statements are accurate - 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: CPA SEC Management Stockholder - 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 government policy Reputation of auditor and risk of lawsuits Risk of lawsuits and integrity of auditor Integrity of auditor and government policy - 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: Double entry Liquidity Classification Articulation - Articulation The idea that information becomes more useful when it can be related to a benchmark or a standard is referred to as: Materiality Comparability Relevance Conservatism - 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 Relevance Materiality Comparability - Conservatism Whether an item is big enough that proper accounting will make a difference to users of accounting information is referred to as: Comparability Relevance Materiality Conservatism - Materiality The notion that information will be more useful if it will impact a decision is referred to as: Comparability Conservatism Materiality Relevance - Relevance The following data were taken from the records of Moss Corporation for the year ending December 31, 2012: 01/01/12 - Assets: $11,250 - Liabilities: 8,580 - Owners' equity: ? 12/31/12 - Assets: ? - Liabilities: $10,365 - Owners Equity: 6,465 Given the above information, owners' equity on January 1, 2012 was: $19,830 $2,670 $885 $7,695 - $2,670 Owners equity: $11,250 - $8,580 = $2,670 Which of the following generally is NOT considered to be a liability? Inventory Notes payable Taxes payable Accounts payable - Inventory If a corporation has total assets of $350,000, total liabilities of $150,000, and retained earnings of $100,000, what is the amount of capital stock? $100,000 $250,000 $150,000 $0 - $100,000 Capital Stock: $350,000 - $150,000 - $100,000. = $100,000 Which of the following would be classified as a current asset? Land Capital stock Accounts receivable Accounts payable - Accounts Receivable The total amount invested to acquire an ownership interest in a corporation is called: Common stock and preferred stock Owners equity Retained earnings Net assets - Common stock and preferred stock Current assets usually are listed on a balance sheet in: Decreasing order of liquidity Decreasing order of profitability Increasing order of liquidity A random fashion - Decreasing order of liquidity Which of the following accounts would NOT be considered a current asset? Inventory Cash Equipment Accounts receivable - Equipment In non-US balance sheets, you will often see each of the following EXCEPT: Current assets and current liabilities will be netted together The stockholders' equity section will be listed first on the balance sheet Property, plant, and equipment will be listed first - The stockholders' equity section will be listed first on the balance sheet The process of formally recording an item in the accounting records so that it will be reflected in the financial statements is called: Materiality Disclosure Valuation Recognition - Recognition The process of determining the dollar value to assign to an item that is to be recognized in the financial statements is called: Disclosure Valuation Materiality Recognition - Valuation Historical cost has long been used in accounting because it is: Relevant Useful Reliable Conservative - Reliable Reporting the details of a transaction in the notes to the financial statements is called: Recognition Materiality Valuation Disclosure - Disclosure The process of valuation involves computing numbers that are both: Comparable and consistent Relevant and reliable Material and conservative Understandable and useful - Relevant and reliable When a company purchases equipment on credit, the effect on the accounting equation will be to: increase Inventory and decrease Cash increase Supplies and increase a liability increase Equipment and increase a liability increase Equipment and decrease Cash - Increase equipment and increase a liability 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 Increase a liability and increase Paid-in Capital Decrease a liability and increase Paid-in Capital Increase Cash and increase a liability - Increase cash and increase paidin Capital When a company pays for a warehouse by paying cash, the effect on the accounting equation will be to: Increase Buildings and increase a liability Increase Equipment in increase Cash Increase Equipment and decrease Cash Increase Buildings and decrease Cash - Increase buildings and decrease cash When a company buys a warehouse by using a mortgage with a local bank, the effect on the accounting equation for the company will be to: Increase Cash and increase Mortgage Payable Increase Mortgage Payable and increase Inventory Decrease Cash and increase Buildings Increase Buildings and increase Mortgage Payable - Increase buildings and increase mortgage payable 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 Land and decrease Cash Increase Prepaid Rent and decrease Cash Increase Cash and increase Prepaid Rent Increase Buildings and decrease Cash - Increase prepaid rent and decrease cash A company's asset mix is determined by: Dividing each asset item on the balance sheet by total assets Dividing each asset item on the balance sheet by total equity Dividing each asset item on the balance sheet by total liabilities Dividing each balance sheet item by total sales for the period - Dividing each asset item on the balance sheet by total assets A company's asset mix is strongly influence by: Government regulation affecting the company The company's industry A company's competitors The philosophy of management regarding financing decisions - The company's industry Financing mix is a measure of: A company's competitors Government regulation affecting the company The degree to which a company finances assets using liabilities or owners' equity The company's industry - The degree to which a company finances assets using liabilities or owners' equity Given the following information, compute operating income - Cost of Goods Sold $2,000 Extraordinary Item -170 Income Taxes 350 Interest Expense 200 Operating Expenses 1,500 Sales 5,500 - $2,000 $5,500 - $2,000 - $1,500 = $2,000 Gross profit is the difference between - Sales and Variable Costs Net Income and Comprehensive Income Sales and Cost of Goods Sold Operating Income and Income Tax Expense - Sales and Cost of Goods Sold A measure of a company's performance that includes all items that are expected to continue into the future is - Gross Profit Income from Continuing Operations Net Income Operating Income - Income from Continuing Operations 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 - Operating Income Comprehensive Income Income from Continuing Operations Net Income - Net Income Operating Income is equal to - Gross Profit plus Cost of Goods Sold Sales less Cost of Goods Sold Comprehensive Income plus and unrealized gains and losses not included in Net Income Income from Continuing Operations plus Income Tax Expense and Interest Expense plus/minus other miscellaneous revenues, expenses, gains, and losses - Income from Continuing Operations plus Income Tax Expense and Interest Expense plus/minus other miscellaneous revenues, expenses, gains, and losses Which of the following is a revenue generating activity? Selling capital stock Paying rent Borrowing money from a bank Selling a product - Selling a product 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 What was the net income on December 31, 2013? - $23,500 $90,500 - $67,000 = $23,500 Earnings per share is equal to - Net income divided by the number of shares of stock sold during the year Net income divided by total number of shares of stock outstanding Total revenues divided by total number of shares of stock outstanding Total revenues divided by the number of shares of stock sold during the year - Net income divided by total number of shares of stock outstanding 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... - $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 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? $422,400 $343,200 $396,000 $369,600 - $369,600 Expenses: $528,000 - $158,400 = $369,600 TRUE or FALSE: With a multiple-step income statement all revenues are grouped together, all expenses are grouped together, and net income is computed as the difference between the two. TrueFalse - False When revenue and expense items are arranged to highlight important profit relationships, the resulting income statement format is called a - single-step income statement comparative income statement multiple-step income statement classified income statement - multiple-step income statement TRUE or FALSE: With a single-step income statement all revenues are grouped together, all expenses are grouped together, and net income is computed as the difference between the two. - True Costs that can be reasonably associated with specific revenues but NOT with specific products should be - allocated to specific products based on the best estimate of the production processing time. charged to expense in the period incurred. expensed in the period in which the related revenue is recognized. capitalized and then amortized over a period not to exceed 60 months. - Expensed in the period in which the related revenue is recognized. Which of the following principles best describes the rationale for matching administrative and selling expenses with revenues of the current period? Immediate recognition Systematic and rational allocation Partial recognition Direct matching - Immediate recognition A wholesale bakery would normally recognize revenue whenthe product is available for sale to a customer. goods are delivered to the customer. management chooses to do so. cash is received from the customer. - Goods are delivered to the customer. Which of the following is an application of the principle of systematic and rational allocation? Telephone expense Office salaries Depreciation expense Sales commissions - Depreciation expense Generally, recognition criteria are met and revenues are recognized - at appropriate points throughout the operating cycle. at the point of sale. at the point of cash collection. when cause and effect are associated. - At the point of sale. Analysis of revenue and expense transactions requires the use of the: Break-even Point Assets-to-equity Ratio Cash Flow Adequacy Equation Expanded Accounting Equation - 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 - All of the statements are true ______ is/are not considered to be an expense of doing business. Wages Cash dividends Buying Landscaping Supplies None are considered to be an expenses 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. Assets, Liability Debt, Cash Cash, Accounts Receivable Cash, Accounts Payable - Cash, Accounts Receivable Most forecasting exercises begin with a forecast of: net income. sales. cash. total assets. - 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: bank loans payable. accounts payable. property, plant, and equipment. operating profit. - Accounts Payable The statement of cash flows replaces the: Balance sheet Statement of financial position Income statement None of these - None of these The statement of cash flows: Provides a connecting link between two consecutive income statements Is a required statement only for those companies using cash-basis accounting Is intended primarily to provide necessary information for assessing the profitability of an entity Summarizes all cash inflows and outflows of an entity for a given period of time - 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. It provides investors with information about the investing and financing activities of an entity. It highlights changes in managerial strategy regarding investments and finances. It provides information about an entity's cash receipts and payments over a period of time. - It measures the profitability of an entity. Which of the following statements is NOT true? The statement of cash flows provides details as to how the cash account changed during a period. The statement of cash flows sheds some light on a company's ability to generate income in the future. The statement of cash flows includes transactions that are not already reflected in the balance sheet and income statement. The statement of cash flows does not replace the income statement. - The statement of cash flows includes transactions that are not already reflected in the balance sheet and income statement. Those transactions and events that enter into the determination of net income are reported under which section of the statement of cash flows? Significant noncash investing and financing activities Financing activities Investing activities Operating activities - Operating activities Which of the following would be reported as a cash flow from financing activities? Cash receipts from interest on notes receivable Cash receipts from dividends on long-term investments Cash receipts from the sale of equipment Cash receipts from the issuance of long-term debt - Cash receipts from the issuance of long-term debt Which of the following would NOT be reported as an investing activity on a statement of cash flows? Collection of a long-term note receivable Extending loans to other entities Sale of a building Amounts borrowed - Amounts Borrowed Which of the following would NOT be included in the operating activities section of the statement of cash flows? Interest paid Dividends paid Interest received Dividends received - Dividends paid The exchange of debt for equipment would: Be shown as a supplementary disclosure Be shown on a statement of cash flows as an investing activity Be shown on a statement of cash flows as a financing activity Be shown on a statement of cash flows as an operating activity - Be shown as a supplementary disclosure Dahbi Corporation has the following financial information available: Operating activities $14,250 Financing activities $ 3,500 Beginning cash balance $ 1,450 Ending cash balance $ 5,650 Given this information, what is the amount of cash provided by (used in) Dahbi's investing activities? - ($13,550) Investing activities: $1,450 + $14,250 + x + $3,500 = $5,650 x = ($13,550) Yuka Company had a beginning cash balance of $1,875. In addition, Yuka Company reported the following items from its cash flow statement: Operating activities $6,450 Investing activities ($4,735) Financing activities ($1,200) Given this information, Yuka Company's ending cash balance is... - $2,390 Ending cash balance: $1,875 + $6,450 - $4,735 - $1,200 = $2,390 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? - $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. - $15,500 Operating activities: $53,200 - $18,000 + $2,500 - $22,200 = $15,500 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