WGU C213 Pre-assessment (Accounting) 2022/2023

What does accounting focus on?

- The impact a business's activities have on its relationships with customers

- The impact a business's activities have on the environment.

- The impact a business's activities have on its public image.

- The impact a business's activities have on its overall financial performance.

The impact a business's activities on its overall financial performance.

Which report summarizes cash collections and cash expenditures from operating, investing, and financing activities over a period of time?

- Cash receipts and disbursements sheet

- Cash flow schedule

- Summary of cash receipts

- Statement of cash flows

Statement of cash flows

Which users would have a primary concern with an organization's ability to provide healthcare benefits?

- Competitors

- Employees

- Vendors

- Suppliers

Employees

Which benefit does a corporation gain by following Generally Accepted Accounting Principles (GAAP)?

- A decrease in its income tax obligations

- A decrease in the amount of net income it reports

- An increase in its comparability to other companies

- An increase in the amount of assets it reports

An increase in its comparability to other companies.

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)

- The Financial Accounting Standards Board (FASB)

- Another certified public accounting firm (CPA)

- The Internal Revenue Service (IRS)

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?

Ownership and Debt

Which term is defined as the residual interest in the net assets of a company?

Owners' equity

A corporation has a 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. Combine the liabilities with assets.

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 will be a good credit risk

- The company will generate net income.

- The company's financial statements fairly reflect its financial position.

- The company will generate positive cash flows

The company's financial statements fairly reflect its financial position

Order the steps in the decision cycle from first to last: Gather information, prepare financial statements, analyze financial statements, make decision, and implement decision.

Prepare financial statements, analyze financial statements, gather information, make decision, and 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 Market value of shares/net income

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.

What is consistent with a continual decline in gross profit if the firm's cost of goods sold remains the same?

- Continual decrease in salaries

- Continual increase in interest

- Continual increase in taxes

- Continual decrease in sales

Continual decrease in sales

Which two cash flow adequacy ratios represent a cash cow?: - 4,510/4932, - 6,991/5,486, - 8,091/9374, - 5220/1875, - or 7589/9210.

6,991/5,486 and 5,220/1,875

Which formula yields a cash time interest earned ratio of 11?

- Cash before interest and taxes of $11,000 / cash paid for income taxes of $1,000

- Cash before interest and taxes of $11,000 / cash paid for interest of $1,000

- Cash before interest and taxes of $11,000 / cash from operations of $1,000

- Cash before interest and taxes of $11,000 / cash paid for acquisitions of $1,000

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?

- Unearned revenue that will be earned in 9 months.

- Notes payable expected to be paid in 18 months.

- Accounts payable due in 30 days.

- Salaries payable due in 2 weeks

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 per

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 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 per

Prepaid insurance will increase 6,000 and cash will decrease 6,000

Which two values affect the measurement of net income?

- Dividends paid

- Stockholder contributions

- Operating expenses

- Ordinary gains and losses

Operating expenses and ordinary gains and losses

Which two items' subtotals are included in a multi-step income statement?

- Gross profit

- Total assets

- Current Liabilities

- Income from operations

Gross profit and 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

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?

Accounts receivable will increase 6,000 and 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?

-228,140

-182,975

-153,279

-145,860

153,279. 153,279 x .22 = 33,721. 153,279 + 33,721 = 187,000.

What is is a common category in a statement of cash flows?

- Cash from planning activities

- Cash from production activities

- Cash from marketing activities

- Cash from investing activities

Cash from investing activities

Which cash flow category would include "cash received from investors"?

- Cash from financing activities

- Cash from charitable activities

- Cash from investing activities

- Cash from sponsoring activities

Cash from financing activities

Which item is an investing activity

- Cash receipts from dividend revenue

- Cash receipts from issuance of stock

- Cash payments for dividends

- Cash payments for purchase of plant assets

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

- Increase in cash from operating activities

- Increase in cash from financing activities

- Decrease in cash from operating activities

An increase in cash from investing activities

What is known about the direct and indirect methods of preparing statements of cash flows?

- The direct method is more popular among large US companies

- The indirect method is more popular among large US companies

- Both methods have the same popularity among large US companies

- Neither method is very popular among large US companies

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?

$175,000

$160,000

$145,000

$120,000

145,000. 200,000 - 15,000 - 40,000 = 145,000.

Which two examples represent financial statement errors? Choose 2 answers

- An accounting employee overpays a supplier and receives a portion of the excess as a kickback

- The accounting department miscalculates the payroll tax due at year-end, resulting in an inaccurate liability

- The outside auditor disagrees with the amount reported as an allowance for uncollectible accounts receivable

- The accountant unintentionally records amounts as revenue that were prepaid by customers but not yet earned

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 purchasing department authorizes the order of all items before they occur

- The company requires two signatures on each check in order for payment to be sent

- The inventory department counts and inspects items as received and forwards the receiving record to accounts payable

- The accounts payable department utilizes pre-numbered checks in the payment of supplier invoices.

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.

- They are feeling pressured to comply with an external auditor.

- They are preparing to meet Sarbanes-Oxley requirements.

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 non-audit 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.

- Firms must help to develop and enforce a code of ethics on audit clients.

- Firms must not audit the same public company for more than five consecutive years.

Firms must not provide certain non-audit 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.

- They must be rotated every five years.

- They must authorize any loans to members of the board of directors.

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.

- They perform the initial accounting for various transactions.

- They issue opinions regarding whether financial statements align with Generally Accepted Accounting Principles (GAAP).

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.

- They ensure that auditors have the recourses and information necessary to provide valuable professional services

- They support company management and boards of directors in the effective discharge of their responsibilities.

- They provide representation and training to controllers of public companies.

They ensure that financial statement users are provided with reliable information to use in decision making.

What does management accounting provide? Choose 2

- The insight that management needs so the business can perform more effectively.

- The insight that outside stakeholders need to choose a company that has a competitive advantage over competitors

- The detailed data that managers need to make decisions that will give the business a competitive edge

- The information needed by the IRS to decide if a company should have a tax audit performed

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?

- Direct labor

- Administrative expenses

- Selling Expenses

- Manufacturing Overhead

Administrative overhead.

Selling expenses

A company manufactures custom-built wooden bookshelves. Which two costs would the company classify as period costs?

- Wood Cost

- Salary cost of the craftsperson

- Salary cost of the receptionist

- Advertising cost

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

What are the 5 steps in Activity - Based Costing (ABC)?

Identify overhead cost activities, Analyze individual overhead costs in terms of cost activities, identify measurable cost drivers, assign overhead, and use the ABC data to make decisions.

Remember, ABC relates only to what?

Overhead costs

Normal wear-and-tear on machines, electricity, routine cleanup, routine maintenance, and regular accounting are examples of what?

Overhead

What is Unit-Level overhead?

Routine overhead. Maintenance, depreciation, and electricity.

What is batch level overhead?

There is overhead cost with starting and stopping the making of one product and the starting of another product.

What is product line overhead?

Servicing the needs of each individual product on the line, such as the receiving dock.

What is facility support overhead?

The overhead costs for just keeping the factory open.

Which two costs are included when calculating inventory costs?

Direct Labor and Overhead

In which scenario would activity-based costing be more appropriate than traditional costing?

- Direct labor and direct materials are the major costs associated with a company's two products. The small overhead cost is closely associated with the products' use of direct labor hours.

- A company produces one product line. All of the overhead is, therefore, allocated to that product line.

- A company produces several different products. The products have very similar requirements for their production and have minimal variation between them.

- A company produces five different products. The products are highly differentiated and have significantly different demands for their use of overhead costs.

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 amount of hours the director spends on organizing the race.

- The amount of the registration fee.

- The number of race participants and spectators.

- The cost of liability insurance for the race.

The number of race participants and spectators.

A manufacturer produces three products: A, B, and C. The company uses the following information to determine activity rates for each pool:

Cost Pool

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 DriverProducts

Product A

10,000 Hours

150 Pounds

20 Moves

Product B

7,500 Hours

250 Pounds

30 Moves

Product C

2,500 Hours

100 Pounds

50 Moves

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

Shoe production: $250,000. 20,000 pairs of shoes

Shoe Batches: $10,000. 500 Batches

Shoe Design: $5,000. 100 Parts

Total: $265,000

Cost Driver

Traditional

10,000 Pairs

150 batches

20 Parts

Minimalist

7,500 pairs

250 batches

30 parts

Spikes

2,500 pairs

100 batches

50 parts

What is the total amount of overhead applied to spikes shoes?

35,750

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?

$412,500

$550,000

$1,462,500

$1,875,000

1,875,000. 2,500,000 x 0.75

Company A calculated the following information under traditional and activity-based costing for the production and sale of 1,000 units of Product B:

Sales T: $100,000 ABC: $100,000

Cost of goods sold T: $70,000 ABC: $110,000

Gross margin T: $30,000 ABC: ($10,000)

Which decision should be made about the selling price of Product B?

-The price of Product B should be increased.

-The price of Product B should be decreased.

-The number of production batches of Product B should be increased.

-Traditional costing should be used instead of activity-based costing.

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:

Sales: 1,500,000

Production Costs:

- Direct Materials: $575,000

- Direct Labor $300,000

Applied overhead using ABC

- Overhead on gallons $375,000

- Overhead on batches $100,000

- Overhead on ingredients $180,000

Total Production Cost: $1,530,000

Gross Profit ($30,000)

$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. 0.75 + 0.10= 0.85. 500,000 x 0.85= 425,000. 425,000 - 375,000 = 50,000. 375,000 - 50,000 = 325,000. Add production costs to get gross profit of 20,000

Which two concepts are studied in cost-volume-profit analysis?

- Liabilities

- Profits

- Levels of activity

- Inventory

Profits and Levels of activity

What are two impacts on costs as sales volume increases? Choose 2

- Total fixed costs will increase in direct proportion

- Total fixed costs will decrease in direct proportion

- Fixed costs per unit will stay the same

- Fixed costs per unit will increase

- Total fixed costs will stay the same

- Fixed costs per unit will decrease

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

4,500

3,000

2,000

6,000. 6,000 x 100 = 600,000. 6,000 x 50 = 300,000. 600,000 - 300,000 = 300,000. 300,000 - 300,000 = 0

A company is experiencing an increase in their bad debt expense. Which change in credit policy would cause this increase?

Credit terms of 2/10, n/30 were granted on all credit sales.

The company tightened their credit policy.

Credit limits were increased for all customers.

Some customers were allowed to pay their bills in 60 days versus the normal 30 days.

Credit limits were increased for all customers

A company budgeted the following purchases for raw materials:

- Jan 10,000

- Feb 20,000

- Mar 25,000

- Apr 22,000

- May 27,000

- Jun 30,000

- Jul 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?

-18,500

-24,750

-25,050

-27,300

24,750

A company plans to purchase inventory for the second half of 2014 as follows:

Jul 100,000

Aug 75000

Sep 225000

Oct 125000

Nov 250000

Dec 30000

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?

-705000

-752500

-790000

-805000

752500