WGU C213 ACCOUNTING FOR DECISION MAKERS EXAM
2026/2027 | Questions & Answers | Latest Verified Answers | OA
Prep | Pass Guaranteed - A+ Graded
SECTION 1: FINANCIAL ACCOUNTING CONCEPTS
Financial Statements, Ratio Analysis, and Financial Reporting
Q1: A company reports the following information for the current year:
● Net Sales: $850,000
● Cost of Goods Sold: $510,000
● Operating Expenses: $180,000
● Interest Expense: $25,000
● Tax Rate: 30%
What is the company's net income?
A. $95,500
B. $97,300
C. $94,500 [CORRECT]
D. $135,000
Correct Answer: C
Rationale:
Step-by-step calculation:
1. Gross Profit = Net Sales - Cost of Goods Sold = $850,000 - $510,000 = $340,000
2. Operating Income (EBIT) = Gross Profit - Operating Expenses = $340,000 -
$180,000 = $160,000
3. Income Before Taxes (EBT) = Operating Income - Interest Expense = $160,000 -
$25,000 = $135,000
4. Income Tax Expense = $135,000 × 30% = $40,500
, 5. Net Income = $135,000 - $40,500 = $94,500
Why A is incorrect: $95,500 results from using 25% tax rate or miscalculating interest
placement.
Why B is incorrect: $97,300 results from subtracting taxes before interest or incorrect
tax calculation.
Why D is incorrect: $135,000 is income before taxes (EBT), not net income.
Q2: Which of the following transactions would increase the current ratio if it is currently
greater than 1?
A. Purchasing inventory on account
B. Paying off accounts payable with cash
C. Collecting accounts receivable
D. Selling inventory at a profit on account [CORRECT]
Correct Answer: D
Rationale:
Current Ratio = Current Assets ÷ Current Liabilities
When current ratio > 1, we need a transaction that increases current assets
proportionally more than current liabilities, or decreases current liabilities proportionally
more than current assets.
Option D - Selling inventory at profit on account:
● Inventory (CA) decreases by cost
● Accounts Receivable (CA) increases by selling price (cost + profit)
● Net effect: Current assets increase by the profit amount
● Current liabilities unchanged
● Result: Current ratio increases
Why A is incorrect: Purchasing inventory on account increases both current assets and
current liabilities equally. When ratio > 1, equal increases decrease the ratio.
,Why B is incorrect: Paying A/P with cash decreases both current assets and current
liabilities equally. When ratio > 1, equal decreases increase the ratio—but this is less
optimal than D.
Why C is incorrect: Collecting A/R exchanges one current asset for another (no net
change in total current assets).
Q3: A company reports the following balance sheet data:
● Cash: $45,000
● Accounts Receivable: $85,000
● Inventory: $120,000
● Prepaid Expenses: $15,000
● Total Current Liabilities: $95,000
What is the company's acid-test (quick) ratio?
A. 2.89
B. 1.37 [CORRECT]
C. 2.79
D. 1.58
Correct Answer: B
Rationale:
Quick Ratio = (Cash + Marketable Securities + Accounts Receivable) ÷ Current Liabilities
Calculation:
● Quick Assets = $45,000 + $85,000 = $130,000
● Current Liabilities = $95,000
● Quick Ratio = $130,000 ÷ $95,000 = 1.37
Key distinction: Quick ratio excludes inventory and prepaid expenses (least liquid
current assets).
, Why A is incorrect: 2.89 uses total current assets ($265,000) ÷ $95,000 = current ratio,
not quick ratio.
Why C is incorrect: 2.79 incorrectly includes prepaid expenses ($280,000 ÷ $95,000).
Why D is incorrect: 1.58 incorrectly includes only half of receivables or uses wrong
denominator.
Q4: Which section of the Statement of Cash Flows would include the purchase of
equipment by issuing a long-term note payable?
A. Operating activities
B. Investing activities
C. Financing activities
D. Significant non-cash investing and financing activities [CORRECT]
Correct Answer: D
Rationale:
Non-cash investing and financing activities are significant transactions that do not
involve cash but affect long-term assets and liabilities. These are reported separately at
the bottom of the Statement of Cash Flows or in notes.
This transaction:
● Investing activity (equipment purchase) - but no cash outflow
● Financing activity (debt issuance) - but no cash inflow
Why A is incorrect: Operating activities include cash effects of transactions entering
into net income.
Why B is incorrect: While purchasing equipment is investing, no cash was paid—cannot
be in investing section.
2026/2027 | Questions & Answers | Latest Verified Answers | OA
Prep | Pass Guaranteed - A+ Graded
SECTION 1: FINANCIAL ACCOUNTING CONCEPTS
Financial Statements, Ratio Analysis, and Financial Reporting
Q1: A company reports the following information for the current year:
● Net Sales: $850,000
● Cost of Goods Sold: $510,000
● Operating Expenses: $180,000
● Interest Expense: $25,000
● Tax Rate: 30%
What is the company's net income?
A. $95,500
B. $97,300
C. $94,500 [CORRECT]
D. $135,000
Correct Answer: C
Rationale:
Step-by-step calculation:
1. Gross Profit = Net Sales - Cost of Goods Sold = $850,000 - $510,000 = $340,000
2. Operating Income (EBIT) = Gross Profit - Operating Expenses = $340,000 -
$180,000 = $160,000
3. Income Before Taxes (EBT) = Operating Income - Interest Expense = $160,000 -
$25,000 = $135,000
4. Income Tax Expense = $135,000 × 30% = $40,500
, 5. Net Income = $135,000 - $40,500 = $94,500
Why A is incorrect: $95,500 results from using 25% tax rate or miscalculating interest
placement.
Why B is incorrect: $97,300 results from subtracting taxes before interest or incorrect
tax calculation.
Why D is incorrect: $135,000 is income before taxes (EBT), not net income.
Q2: Which of the following transactions would increase the current ratio if it is currently
greater than 1?
A. Purchasing inventory on account
B. Paying off accounts payable with cash
C. Collecting accounts receivable
D. Selling inventory at a profit on account [CORRECT]
Correct Answer: D
Rationale:
Current Ratio = Current Assets ÷ Current Liabilities
When current ratio > 1, we need a transaction that increases current assets
proportionally more than current liabilities, or decreases current liabilities proportionally
more than current assets.
Option D - Selling inventory at profit on account:
● Inventory (CA) decreases by cost
● Accounts Receivable (CA) increases by selling price (cost + profit)
● Net effect: Current assets increase by the profit amount
● Current liabilities unchanged
● Result: Current ratio increases
Why A is incorrect: Purchasing inventory on account increases both current assets and
current liabilities equally. When ratio > 1, equal increases decrease the ratio.
,Why B is incorrect: Paying A/P with cash decreases both current assets and current
liabilities equally. When ratio > 1, equal decreases increase the ratio—but this is less
optimal than D.
Why C is incorrect: Collecting A/R exchanges one current asset for another (no net
change in total current assets).
Q3: A company reports the following balance sheet data:
● Cash: $45,000
● Accounts Receivable: $85,000
● Inventory: $120,000
● Prepaid Expenses: $15,000
● Total Current Liabilities: $95,000
What is the company's acid-test (quick) ratio?
A. 2.89
B. 1.37 [CORRECT]
C. 2.79
D. 1.58
Correct Answer: B
Rationale:
Quick Ratio = (Cash + Marketable Securities + Accounts Receivable) ÷ Current Liabilities
Calculation:
● Quick Assets = $45,000 + $85,000 = $130,000
● Current Liabilities = $95,000
● Quick Ratio = $130,000 ÷ $95,000 = 1.37
Key distinction: Quick ratio excludes inventory and prepaid expenses (least liquid
current assets).
, Why A is incorrect: 2.89 uses total current assets ($265,000) ÷ $95,000 = current ratio,
not quick ratio.
Why C is incorrect: 2.79 incorrectly includes prepaid expenses ($280,000 ÷ $95,000).
Why D is incorrect: 1.58 incorrectly includes only half of receivables or uses wrong
denominator.
Q4: Which section of the Statement of Cash Flows would include the purchase of
equipment by issuing a long-term note payable?
A. Operating activities
B. Investing activities
C. Financing activities
D. Significant non-cash investing and financing activities [CORRECT]
Correct Answer: D
Rationale:
Non-cash investing and financing activities are significant transactions that do not
involve cash but affect long-term assets and liabilities. These are reported separately at
the bottom of the Statement of Cash Flows or in notes.
This transaction:
● Investing activity (equipment purchase) - but no cash outflow
● Financing activity (debt issuance) - but no cash inflow
Why A is incorrect: Operating activities include cash effects of transactions entering
into net income.
Why B is incorrect: While purchasing equipment is investing, no cash was paid—cannot
be in investing section.
