WGU C213 Accounting for Decision Makers Exam
2022/2023
1.Accounting<<the recording of the day-to-day financial activities of a
company and the organization of that information into summary
reports used to evaluate the company’s financial status
2.Bookkeeping<<the preservation of a systematic, quantitative record ofan activity
3.accounting system<<used by a business to handle routine
bookkeeping tasks and to structure the information so it can be used
to evaluate the performance and financial status of the business
4.Accounting information<<Info that is intended to be useful in making
decisions about the future.
- The balance sheet, the income statement, and the statement of
cashflows-
<<What are the three primary financial statements?
6.External Users<<Who is financial accounting information primarily
prepared for and used by?
7.Managerial Accounting<<the name given to accounting systems
designed for internal users
8.Balance Sheet<<Reports a company’s assets, liabilities, and owners’
equity
9.Income Statement<<reports the amount of net income earned by a
company during a period
10.Net income<<the excess of a company’s revenues over its expenses
11.statement of cash flows<<reports the amount of cash collected and
paid out by a company in the following three types of activities
operating, investing, and financing
12.FASB<<Which private body establishes accounting rules in the U.S.?
13.Financial Accounting Standards Board (FASB)<<a private body
established and supported by the joint efforts of the U.S. business
community, financial ana- lysts, and practicing accountants
14.The Securities and Exchange Commission (SEC)<<the organization
that regulates U.S. stock exchanges and seeks to create a fair
information environment in which investors can buy and sell stocks
without fear that companies are hiding or manipulating financial data
15.American Institute of Certified Public Accountants (AICPA)<<the
profes- sional organization of certified public accountants (CPAs) in
the United States
16.Public Company Accounting Oversight Board (PCAOB)<<the
organization that inspects the audit practices of registered audit firms
and has statutory authority
What does accounting focus on?
The impact a business’s activities have on its overall financial performance
Which report summarizes cash collections and cash expenditures from operating, investing, and financing activities over a period of time?
Statement of cash flows
Which users would have a primary concern with an organization’s ability to provide healthcare benefits?
Employees
Which body regulates a certified public accounting firm’s audit practices when the firm is auditing a large publicly traded company?
The Public Company Accounting Oversight Board (PCAOB)
What has had the most significant impact on accounting practices?
Information technology
What two items of information are revealed on the balance sheet?
Choose 2 answers
Ownership.
Debt
Which term is defined as the residual interest in the net assets of a company?
Owners’ equity
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?
$350 million
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?
In 2014, a company provides services to a customer for which cash will be collected the next year (2015).
Which category on the statement of cash flows summarizes cash receipts and payments to owners and creditors of the company?
Cash flows from financing activities
Where would an investor find a summary of a company’s significant accounting policies?
In the notes to financial statements
Which assurance does an external audit report provide for its readers?
The company’s financial statements fairly reflect its financial position
Reliable
Information that can be verified
Relevant
Information having to do with the matter at hand
Material
Information that is important enough to make a difference
Conservatism
Information related to recognizing losses as they occur
steps in the decision cycle
1 Prepare financial statements.
2 Analyze financial statements.
3 Gather information.
4 Make decision.
5 Implement decision
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?
11.0
What is consistent with a continual decline in gross profit if the firm’s cost of goods sold remains the same?
Continual decrease in sales
Which two cash flow adequacy ratios represent a cash cow?
$6,991/$5,486. $5,220/$1,875.
Which formula yields a cash times interest earned ratio of 11?
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?
Notes payable expected to be paid in 18 months
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?
Equipment will increase $200,000, and cash will decrease $200,000.
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?
Prepaid insurance will increase $6,000, and cash will decrease $6,000.
Which two values affect the measurement of net income?
Choose 2 answers
Ordinary gains and losses . Operating expenses
Which two items’ subtotals are included in a multi-step income statement?
Choose 2 answers
Gross profit. Income from operations
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?
November 2011
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?
$4,000
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
Accounts receivable will increase $6,000. Retained earnings will increase $10,000.
What was the 2012 net profit amount if the 2013 pro-forma net profit of $187,000 was based on a 22% increase?
$153,279
What is a common category in a statement of cash flows?
Cash from investing activities
Which cash flow category would include “cash received from investors”?
Cash from financing activities
Which item is an investing activity?
Cash payments for purchase of plant assets
What impact does the sale of equipment have on the statement of cash flows?
Increase in cash from investing activities
What is known about the direct and indirect methods of preparing statements of cash flow?
The indirect method is more popular among large U.S. companies
A company’s statement of cash flows includes the following cash transactions:
Sales 1,250,000
Inventory Purchase -750,000
Property and Equipment Purchase -270,000
Interest Payment on Long-Term Debt -25,000
Payment of Wages -315,000
Payment of Rent -40,000
Borrowing Long-Term Debt 200,000
Payment of Cash Dividends -15,000
Repurchase of Treasury Stock -40,000
Total Cash Flows -5,000
Assuming the company uses US GAAP standards, what is the total cash flow from financing activities?
$145,000
Which two examples represent financial statement errors?
Choose 2 answers
The accounting department miscalculates the payroll tax due at year-end, resulting in an inaccurate liability. & The accountant unintentionally records amounts as revenue that were prepaid by customers but not yet earned.
Which internal control is intended to ensure that a company does not mistakenly pay a supplier for an invoice that includes more items than were actually received?
The inventory department counts and inspects items as received and forwards the receiving record to accounts payable.
What are two common reasons for managers to manipulate reported earnings?
Choose 2 answers
They are feeling pressured to meet internal sales goals. They are preparing to qualify for a bank loan.
Which two requirements must accounting firms that audit public companies meet under the Sarbanes-Oxley Act?
Choose 2 answers
Firms must not provide certain nonaudit services to audit clients, such as management functions or legal services. Firms must report to and be retained by the audit committee rather than the CFO or other company management.
Which two requirements must management of public companies meet under the Sarbanes-Oxley Act?
Choose 2 answers
They must provide an assessment of the effectiveness of internal controls with each annual report. They must support a stronger board and audit committee.
Which two actions do internal auditors perform to assist in maintaining the integrity of financial statements?
Choose 2 answers
They search for and investigate fraud. They review financial records and internal controls.
What is a significant role of the U.S. Securities and Exchange Commission (SEC) in financial reporting?
They ensure that financial statement users are provided with reliable information to use in decision making
What does management accounting provide?
Choose 2 answers
The insight that management needs so the business can perform more effectively. The detailed data that managers need to make decisions that will give the business a competitive edge.
How does management accounting differ from financial accounting?
Management accounting is used primarily for internal planning, control, and evaluation.
Which account is seen on the balance sheet of a manufacturing company but not on the balance sheet of a service-oriented company?
Inventory
What is a cost that will change in the future based upon the decision made?
Differential cost
Which two examples are period costs?
Choose 2 answers
Administrative expenses. Selling expenses.
A company manufactures custom-built wooden bookshelves.
Which two costs would the company classify as period costs?
Choose 2 answers
Salary cost of the receptionist. Advertising cost.
What role do ethical standards have in management accounting?
To guide the resolution to possible ethical dilemmas that the managerial accountant may encounter
During its first month of operations, a manufacturer incurs the following costs in dollars related to activities within its factory:
Direct materials costs $5,000
Indirect materials $2,000
Direct labor $15,000
Indirect labor $3,000
Factory rent $10,000
Depreciation on factory equipment $8,000
What are the manufacturer’s total product costs for the month?
$43,000
During its first month of operations, a manufacturer incurs the following costs (in dollars) related to activities within its factory:
Direct materials $15,000
Direct labor $30,000
Manufacturing overhead $40,000
What amount should be reported as cost of goods sold on the income statement if 5,000 units are produced and 4,000 are sold?
$68,000
Which two costs are included when calculating inventory costs?
Choose 2 answers
Direct labor costs. Overhead costs
In which scenario would activity-based costing be more appropriate than traditional costing?
A company produces five different products. The products are highly differentiated and have significantly different demands for their use of overhead costs.
Which category of ABC activities are machine setup and material movement costs associated with?
Batch-level activities
The director of a marathon race wants to assign the cost of having police officers along the race route to manage crowd control.
Which consideration is an appropriate cost driver?
The number of race participants and spectators
The company uses the following information to determine activity rates for each pool:
Cost Pool Costs Total Activity
Pool 1
$300,000
20,000 hours
Pool 2
$20,000
500 pounds
Pool 3
$10,000
100 moves
Total
$330,000
Data concerning the three products appear below:
Cost Driver Products A Products B Products C
Number of hours
10,000
7,500
2,500
Number of pounds
150
250
100
Number of moves
20
30
50
What is the total amount of overhead applied to product A?
$158,000
A running shoe manufacturer produces three types of shoes: traditional, minimalist, and spikes.
The company uses the following information to determine activity rates for each pool:
Cost Pool Costs Total Activity
Shoe Production
$250,000
20,000 pairs of shoes
Shoe batches
$10,000
500 batches
Shoe design
$5,000
100 parts
Total
$265,000
Data concerning the three shoe products appear below:
Cost Driver Traditional Minimalist Spikes
Number of pairs of shoes
10,000
7,500
2,500
Number of batches
150
250
100
Number of parts
20
30
50
What is the total amount of overhead applied to spikes shoes?
$35,750
Company A calculated the following information under traditional and activity-based costing for the production and sale of 1,000 units of Product B:
Traditional ABC
Sales $100,000 $100,000
Cost of goods sold $70,000 $110,000
Gross margin $30,000 ($10,000)
Which decision should be made about the selling price of Product B?
The price of Product B should be increased.
A company reported the following information for the production and sale of 500,000 gallons of oil:
(Image)
Overhead was applied based upon the following predetermined overhead rates:
$0.75 per gallon
$500 per batch
$1,000 per ingredient
What would be the gross profit if the company increased their selling price per gallon by $0.10?
$20,000
Which two concepts are studied in cost-volume-profit analysis?
Choose 2 answers
Levels of activity. Profits.
What are two impacts on costs as sales volume increases?
Choose 2 answers
Total fixed costs will stay the same. Fixed costs per unit will decrease.
A company manufactures and sells widgets. The following information is available:
- Each widget sells for $100.
- The variable cost per widget is $50.
- Total fixed costs per month are $300,000.
How many widgets does the company need to sell each month to break even?
6,000
(Image)
What do total revenues equal at the break-even point?
$4,500
(Image)
Which statement is true with respect to the point on this graph when sales are at 150 units per month?
Total costs equal $3,500.
A company is experiencing an increase in their bad debt expense.
Which change in credit policy would cause this increase?
Credit limits were increased for all customers.
A company has projected the following sales for the spring quarter of 2014:
April $200,000
May $250,000
June $275,000
65% of all sales are paid for with cash. The remainder is on credit.
The pattern for credit receivables collections are:
Month of Sale 60%
Month After Sale 30%
Second Month After Sale 10%
What are the forecasted cash collections for the month of June?
$269,750
A company budgeted the following purchases for raw materials:
Month January February March April May June July
Budget $10,000 $20,000 $25,000 $22,000 $27,000 $30,000 $24,000
The company has a policy of paying for 40% of the purchases in the month of purchase, 35% in the month following the purchase, and 25% in the second month following the purchase.
Based on this information, what are the budgeted cash disbursements for May?
$24,750
A company plans to purchase inventory for the second half of 2014 as follows:
July $100,000
August $75,000
September $225,000
October $125,000
November $250,000
December $30,000
They usually pay 50% of inventory purchases in the month of purchase, 35% in the following month, and 15% in the second month.
Based on this information, what are the forecasted total 2014 cash payments for inventory purchased in the second half of 2014?
$752,500
Which benefit does a corporation gain by following Generally Accepted Accounting Principles (GAAP)?
An increase in its comparability to other companies
Order the steps in the decision cycle from first (1) to last (5).
Select your answers from the pull-down list.
1 Prepare financial statements. 2 Analyze financial statements. 3 Gather information. 4 Make decision. 5 Implement decision.
What does it mean if a company has a debt ratio of 101.5%?
The company has 1.5% more total liabilities than total assets.
A manufacturer produces three products: A, B, and C.
The company uses the following information to determine activity rates for each pool:
Cost Pool Costs Total Activity
Pool 1
$300,000
20,000 hours
Pool 2
$20,000
500 pounds
Pool 3
$10,000
100 moves
Total
$330,000
Data concerning the three products appear below:
Cost Driver Products A Products B Products C
Number of hours
10,000
7,500
2,500
Number of pounds
150
250
100
Number of moves
20
30
50
What is the total amount of overhead applied to product A?
$158,000
Given the following information:
Pairs of shoes expected to be produced 1,950,000
Pairs of shoes produced 2,500,000
Overhead rate $0.75
What is the amount of applied overhead?
$1,875,000