WGU D774 - PA QUESTIONS WITH CORRECT ANSWERS | BRAND NEW!
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62 Terms
Which ancient civilization dates to the early development of accounting?
Ancient Mesopotamia (c. 3000 BCE)
3 multiple choice options
Which year is associated with the stock market crash that had a profound economic impact?
1929
3 multiple choice options
What was the regulatory outcome of accounting scandals such as Enron, WorldCom, and Tyco?
The Sarbanes-Oxley Act was introduced, requiring stricter financial controls and oversight.
3 multiple choice options
A business owner is trying to better understand their company's financial performance and operations. The owner recently learned that two types of accounting—financial accounting and managerial accounting—serve different purposes. What is one difference between them?
Financial accounting focuses on external reporting, while managerial accounting focuses on internal decision-making.
3 multiple choice options
Which statement describes the focus of managerial accounting?
Improving future results based on an analysis of past performance
3 multiple choice options
A company is preparing annual financial statements to share with investors. Which characteristic of financial accounting reports applies in this situation?
They include monetary and nonmonetary information.
3 multiple choice options
A publicly traded company is preparing to issue stock to its investors. As part of the process, the company must submit financial disclosures and filings to the regulatory agency overseeing securities markets. Which federal agency is responsible for this regulation?
Securities and Exchange Commission (SEC)
2 multiple choice options
Which organization is an independent, nonprofit entity responsible for setting financial accounting and reporting standards for public and private sector businesses in the United States that use generally accepted accounting principles (GAAP)?
Financial Accounting Standards Board (FASB)
2 multiple choice options
What is the purpose of the Public Company Accounting Oversight Board (PCAOB)?
It oversees the audits of public companies to protect investors.
2 multiple choice options
A multinational corporation wants to hire an audit firm with extensive experience in financial statement auditing for publicly traded companies. Which type of firm would be the most suitable choice?
Big Four
3 multiple choice options
Which accounting formula does the income statement represent?
Revenues - expenses
3 multiple choice options
What does a company's operating expense on the income statement represent?
The day-to-day operational costs not associated with the direct selling of products or services
2 multiple choice options
A business pays rent for its office space, which is reported as an expense on its income statement.Which category includes this expense?
General and administrative expenses
2 multiple choice options
Which financial statement reports the profit or loss using the accrual basis of accounting?
Income statement
2 multiple choice options
How do the income statement categories allow for different income streams when a company earns money from multiple sources?
It categorizes revenue based on operating and non-operating activities.
2 multiple choice options
A shopkeeper receives $500 from selling products in their store. Where should this be reported on the income statement?
Revenues
2 multiple choice options
The investors of Kretsmart are interested in whether Kretsmart has been profitable for the last year. The investors received the complete financial statements for the company. Which report should they review to see if the company was profitable?
Income statement
2 multiple choice options
A bakery sells $10,000 worth of cakes in one month, but after subtracting the cost of ingredients, rent, and wages, the business is left with $3,500. Where should the user of the income statement expect to see the $10,000?
Revenue
2 multiple choice options
A retailer reports an increase in revenue but a decrease in income from the previous year. Why can income decrease while revenue increases?
Higher expenses offset the revenue increase.
2 multiple choice options
A company reports high revenue but low net income.Which financial insight does the income statement provide in this scenario?
It highlights the impact of expenses on overall profitability.
2 multiple choice options
Which type of income statement should report gross margin in the income statement?
Multiple step
2 multiple choice options
Which financial statement report would a manager use to determine how much the firm owed its suppliers?
Balance sheet
2 multiple choice options
A company has the following items:
Equipment: $50,000
Cash: $20,000
Accounts payable: $30,000
Land: $60,000
Accounts receivable: $10,000
Which amount should the user expect to see on the balance sheet in the category of long-term assets?
$110,000
2 multiple choice options
A business is finalizing its balance sheet and needs to determine where to classify cash received from recent sales. Which section of the balance sheet should include this cash?
Asset
2 multiple choice options
Plairtrack has developed a new software program and wants to protect its exclusive rights to the design and functionality. Which asset classification applies to this legal protection on the balance sheet?
Patent
2 multiple choice options
Pruhart Tech has developed a distinctive logo and brand name to differentiate its products from its competitors. The company wants to classify this legally protected brand identity on its balance sheet. Which category should this be recorded under in accounting?
Intangible asset
2 multiple choice options
Merrilton Robotics's balance sheet shows only three items:
cash balance of $1,200,000
supplies of $600,000
equipment of $700,000
The company showed no liabilities. What is Merrilton Robotics's owners' equity balance in its balance sheet?
$2,500,000
2 multiple choice options
A business pays off a portion of its outstanding accounts payable. With this payoff, the company reduces its cash account. Which other account would be affected by this transaction?
Liability decreases.
2 multiple choice options
Alliah Company is a new local manufacturer, and the owners want to ensure the financial books of the company are created properly. Alliah Company's owners would like to ensure that revenue is recorded when the products are sold even though they give their customers 30 days to pay their invoices. Which basis of accounting should Alliah choose?
Accrual basis
3 multiple choice options
On December 10, 20X1, a company sold $500 in product to a customer and billed the customer for the purchase with a due date of January 9, 20X2. The customer paid on that date. A sales entry was not made on December 10, 20X1. Instead, revenue was recorded on January 9th, 20X2.
Which basis of accounting is used to record the $500 in revenue for cash collection from a customer for a delivery made two months prior?
Cash basis
2 multiple choice options
Which step ensures that the net cash flows from operating, investing, and financing activities match the change in cash balance during the period?
Reconcile total net cash flows to the change in cash balance
3 multiple choice options
In which section of the statement of cash flows would Freedom Rock Bicycles report receiving $5,000 from an investor who will receive shares in the business?
Financing activities
3 multiple choice options
What would be a transaction found in the operating section of the statement of cash flows?
Cash sales of inventory to customers
3 multiple choice options
What would be a transaction found in the financing section of the statement of cash flows?
Repayment of debt to the bank in cash
3 multiple choice options
Why are cash flows from operating activities critical for assessing a company's ability to sustain operations?
They indicate whether a company can generate cash from its core business.
2 multiple choice options
Which financial statement report needs the net income from the income statement?
Statement of owners' equity
3 multiple choice options
Which balance is reconciled from the balance sheet on a statement of cash flows?
Cash
3 multiple choice options
Which statement explains the relationship between the balance sheet and the statement of cash flows?
The statement of cash flows reconciles the cash balance that is reported on the balance sheet.
3 multiple choice options
Which balance from the statement of owners' equity does the balance sheet rely on to prepare this financial report?
Retained earnings
3 multiple choice options
The IT department of a company consistently receives a 3% budget increase each year without a detailed review of individual expenses.
What is a potential drawback of this budgeting method?
It may perpetuate inefficiencies.
2 multiple choice options
How does incremental budgeting impact operational efficiency?
It leads to inefficiencies by not critically reviewing expenses.
2 multiple choice options
A company using incremental budgeting struggles to reduce costs during an economic downturn. How does incremental budgeting impact cost-cutting initiatives?
It assumes past spending patterns continue.
3 multiple choice options
A small business wants to expand but must decide whether it can afford to open a new location. What is the purpose of budgeting in this decision?
To assess financial feasibility
3 multiple choice options
What is a recommended first step for preparing an incremental budget?
Base the budget on the prior period's budget
3 multiple choice options
What happens to unspent funds in an incremental budgeting system?
They are often carried forward with minor adjustments.
3 multiple choice options
What is a principle of zero-based budgeting?
Allocating every dollar to a specific purpose
3 multiple choice options
Under incremental budgeting, a company's divisions were allocated the following:
Division A: $60,000
Division B: $80,000
Division C: $60,000
What is the initial allocation for each division in zero-based budgeting if the company has a budget of $200,000?
Divisions will justify needs from zero to receive funding based on new plans and goals.
3 multiple choice options
What should be the primary focus in deciding how to allocate resources under zero-based budgeting?
Allocate funds based on how well each department justifies its needs
3 multiple choice options
Given the following data:
budgeted sales price per unit: $50
budgeted quantity sold: 1,000 units
actual sales price per unit: $55
actual quantity sold: 1,100 units
What is the total revenue variance?
$10,500 favorable
3 multiple choice options
What is the long-term purpose of trend analysis in financial reporting?
To analyze historical data and predict future performance
3 multiple choice options
A company's sales figures for the last three years are as follows:
Year 1: $500,000
Year 2: $550,000
Year 3: $600,000
What is the expected sales revenue for Year 4 if this trend continues?
$650,000
3 multiple choice options
How does exception reporting assist in fraud detection?
It flags unusual or suspicious activities for further review.
3 multiple choice options
A company budgets $100,000 for monthly sales but records actual sales of $85,000. What does this variance indicate?
An unfavorable variance, meaning the company earned less revenue than planned
3 multiple choice options
A business notices a significant unfavorable materials variance. Which action should management take?
Investigate the cause of the increased costs and look for alternative suppliers
3 multiple choice options
A company expected labor costs to be $15 per hour for 1,000 hours of work, but the actual cost was $14 per hour for the same 1,000 hours. What is the labor rate variance?
$1,000 favorable
3 multiple choice options
A manufacturing company's direct labor cost per unit is $18. Management estimates that production in the following month will decrease by 23%. How should total direct labor cost next month be impacted?
It should decrease by 23%.
3 multiple choice options
What is a distinguishing characteristic of a mixed cost?
As production levels increase, one component increases proportionately while the other stays the same.
2 multiple choice options
A company produces shoes and has expenses that include the CEO's salary, marketing, rubber, and leather. Which approach would be correct for calculating product costs?
Sum the cost of rubber and leather
3 multiple choice options
Which type of company uses a raw materials inventory account?
Manufacturing company
3 multiple choice options
When does inventory cost become part of cost of goods sold?
Once inventory is bought by a customer
3 multiple choice options
An assembly line worker is painting one part of a product. Which type of cost refers to the amount of wages paid to an assembly line worker?
Direct labor
3 multiple choice options
The company a manufacturer purchases raw materials from has increased its prices by 5%. Which type of cost will be affected by this increase in price?
Prime costs
3 multiple choice options