WGU C213 Accounting for Decision Makers
Final Exam Official Practice Exam Actual
Exam 2026/2027 with Detailed Rationales |
Complete Exam-Style Questions | Pass
Guaranteed – A+ Graded
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SECTION 1: FINANCIAL STATEMENTS & REPORTING Q1 – Q10
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Question 1 of 50
Apex Manufacturing, a publicly traded industrial equipment producer, is preparing its annual
financial statements for the year ended December 31, 2026. The controller is reviewing
whether a $2.4 million lawsuit settlement, paid in January 2027 but related to a 2026 product
defect, should be reported in the 2026 financial statements. Under accrual-basis GAAP, how
should this settlement be treated?
A. Recognized as a liability on the December 31, 2026 balance sheet with disclosure in the
notes
B. Disclosed only in the notes to the 2026 financial statements with no balance sheet
recognition
C. Recognized as an expense only on the 2027 income statement when cash is paid
D. Ignored entirely in the 2026 financial statements since the cash payment occurred in 2027
Correct Answer: A
Rationale: Under accrual-basis GAAP and the matching principle, a loss contingency that is
both probable and reasonably estimable at year-end must be recognized as a liability on the
balance sheet with an accompanying expense, even if cash payment occurs in a subsequent
period. Choice B describes a reasonably possible but not probable contingency, which is
incorrect because the lawsuit relates to a 2026 product defect and settlement terms were
likely known before year-end. On the C213 exam, always apply the two-pronged test: probable
and estimable means accrue; otherwise, disclose.
Question 2 of 50
Bristol Retail Corp. reported net income of $485,000 for 2026. During the year, accounts
receivable increased by $32,000, inventory decreased by $18,000, accounts payable increased
,by $24,000, and depreciation expense was $56,000. The company also sold equipment with a
book value of $40,000 for $52,000 cash. Using the indirect method, what is Bristol's net cash
provided by operating activities for 2026?
A. $551,000
B. $567,000
C. $591,000
D. $603,000
Correct Answer: C
Rationale: Under the indirect method, start with net income ($485,000), add back non-cash
depreciation ($56,000), subtract the increase in accounts receivable ($32,000), add the
decrease in inventory ($18,000), add the increase in accounts payable ($24,000), and exclude
the $12,000 gain on equipment sale ($52,000 − $40,000) by subtracting it from operating
activities, yielding $485,000 + $56,000 − $32,000 + $18,000 + $24,000 − $12,000 = $539,000.
The $52,000 cash proceeds from the equipment sale are reported as an investing activity, not
operating. The most tempting wrong answer, D, incorrectly includes the full $52,000 sale
proceeds in operating activities rather than netting the gain. On the C213 exam, remember
that gains on asset sales are operating subtractions under the indirect method because they
inflated net income but the cash belongs in investing.
Question 3 of 50
Hartwell Logistics, a freight transportation company, experienced a $45,000 decrease in
prepaid insurance, a $62,000 increase in wages payable, and a $28,000 decrease in unearned
revenue during 2026. The company uses the direct method to prepare its statement of cash
flows. How should these three items affect the operating activities section?
A. Increase cash from operations by $79,000
B. Increase cash from operations by $107,000
C. Decrease cash from operations by $35,000
D. Decrease cash from operations by $107,000
Correct Answer: A
Rationale: Under the direct method, a decrease in prepaid insurance ($45,000) represents
cash saved from prior period prepayments and increases operating cash flow; an increase in
wages payable ($62,000) means less cash was paid to employees than expensed, also
increasing cash flow; a decrease in unearned revenue ($28,000) means the company
recognized revenue for which cash was collected in a prior period, decreasing current cash
flow, so the net effect is $45,000 + $62,000 − $28,000 = $79,000 increase. Choice B incorrectly
adds all three items without recognizing that the decrease in unearned revenue reduces cash.
On the C213 exam, treat liability increases and asset decreases as cash inflows under the
direct method, while liability decreases and asset increases are cash outflows.
, Question 4 of 50
During 2026, Meridian Software Solutions issued 10,000 shares of $2 par value common
stock for $18 per share and repurchased 2,000 shares of its own stock for $22 per share. The
company also declared and paid cash dividends of $75,000. How should these transactions
be classified in the statement of cash flows?
A. The stock issuance is a financing inflow of $180,000, the treasury stock purchase is a
financing outflow of $44,000, and dividends paid are a financing outflow of $75,000
B. The stock issuance is a financing inflow of $160,000, the treasury stock purchase is a
financing outflow of $44,000, and dividends paid are an operating outflow of $75,000
C. The stock issuance is a financing inflow of $180,000, the treasury stock purchase is an
investing outflow of $44,000, and dividends paid are a financing outflow of $75,000
D. The stock issuance is a financing inflow of $180,000, the treasury stock purchase is a
financing outflow of $40,000, and dividends paid are a financing outflow of $75,000
Correct Answer: A
Rationale: Cash received from issuing stock is always a financing inflow calculated at the
issue price (10,000 shares × $18 = $180,000), treasury stock purchases are financing outflows
at the repurchase price (2,000 shares × $22 = $44,000), and dividends paid are financing
outflows under U.S. GAAP. Choice D incorrectly uses the par value ($2) to calculate the stock
issuance inflow rather than the actual cash received. On the C213 exam, par value is
irrelevant for cash flow classification; always use the actual cash exchanged in the
transaction.
Question 5 of 50
Caldwell Industries is preparing its balance sheet at December 31, 2026. The company has
$120,000 in accounts payable, $85,000 in accrued liabilities, $200,000 in short-term notes
payable due March 2027, and $350,000 in bonds payable maturing in June 2027. Management
intends to refinance the bonds with a new long-term debt issuance before the maturity date.
How should these liabilities be classified on the December 31, 2026 balance sheet?
A. Current liabilities of $405,000 and long-term liabilities of $350,000
B. Current liabilities of $755,000 and long-term liabilities of $0
C. Current liabilities of $405,000 and long-term liabilities of $350,000 only if the refinancing
agreement is completed by the balance sheet date
D. Current liabilities of $405,000 and long-term liabilities of $350,000 if management has both
the intent and ability to refinance before maturity
Correct Answer: D
Rationale: Under GAAP, short-term obligations expected to be refinanced on a long-term basis
may be classified as noncurrent if management has both the intent and the ability to
refinance, which typically requires either actual refinancing before the financial statements
Final Exam Official Practice Exam Actual
Exam 2026/2027 with Detailed Rationales |
Complete Exam-Style Questions | Pass
Guaranteed – A+ Graded
══════════════════════════════════════
SECTION 1: FINANCIAL STATEMENTS & REPORTING Q1 – Q10
══════════════════════════════════════
Question 1 of 50
Apex Manufacturing, a publicly traded industrial equipment producer, is preparing its annual
financial statements for the year ended December 31, 2026. The controller is reviewing
whether a $2.4 million lawsuit settlement, paid in January 2027 but related to a 2026 product
defect, should be reported in the 2026 financial statements. Under accrual-basis GAAP, how
should this settlement be treated?
A. Recognized as a liability on the December 31, 2026 balance sheet with disclosure in the
notes
B. Disclosed only in the notes to the 2026 financial statements with no balance sheet
recognition
C. Recognized as an expense only on the 2027 income statement when cash is paid
D. Ignored entirely in the 2026 financial statements since the cash payment occurred in 2027
Correct Answer: A
Rationale: Under accrual-basis GAAP and the matching principle, a loss contingency that is
both probable and reasonably estimable at year-end must be recognized as a liability on the
balance sheet with an accompanying expense, even if cash payment occurs in a subsequent
period. Choice B describes a reasonably possible but not probable contingency, which is
incorrect because the lawsuit relates to a 2026 product defect and settlement terms were
likely known before year-end. On the C213 exam, always apply the two-pronged test: probable
and estimable means accrue; otherwise, disclose.
Question 2 of 50
Bristol Retail Corp. reported net income of $485,000 for 2026. During the year, accounts
receivable increased by $32,000, inventory decreased by $18,000, accounts payable increased
,by $24,000, and depreciation expense was $56,000. The company also sold equipment with a
book value of $40,000 for $52,000 cash. Using the indirect method, what is Bristol's net cash
provided by operating activities for 2026?
A. $551,000
B. $567,000
C. $591,000
D. $603,000
Correct Answer: C
Rationale: Under the indirect method, start with net income ($485,000), add back non-cash
depreciation ($56,000), subtract the increase in accounts receivable ($32,000), add the
decrease in inventory ($18,000), add the increase in accounts payable ($24,000), and exclude
the $12,000 gain on equipment sale ($52,000 − $40,000) by subtracting it from operating
activities, yielding $485,000 + $56,000 − $32,000 + $18,000 + $24,000 − $12,000 = $539,000.
The $52,000 cash proceeds from the equipment sale are reported as an investing activity, not
operating. The most tempting wrong answer, D, incorrectly includes the full $52,000 sale
proceeds in operating activities rather than netting the gain. On the C213 exam, remember
that gains on asset sales are operating subtractions under the indirect method because they
inflated net income but the cash belongs in investing.
Question 3 of 50
Hartwell Logistics, a freight transportation company, experienced a $45,000 decrease in
prepaid insurance, a $62,000 increase in wages payable, and a $28,000 decrease in unearned
revenue during 2026. The company uses the direct method to prepare its statement of cash
flows. How should these three items affect the operating activities section?
A. Increase cash from operations by $79,000
B. Increase cash from operations by $107,000
C. Decrease cash from operations by $35,000
D. Decrease cash from operations by $107,000
Correct Answer: A
Rationale: Under the direct method, a decrease in prepaid insurance ($45,000) represents
cash saved from prior period prepayments and increases operating cash flow; an increase in
wages payable ($62,000) means less cash was paid to employees than expensed, also
increasing cash flow; a decrease in unearned revenue ($28,000) means the company
recognized revenue for which cash was collected in a prior period, decreasing current cash
flow, so the net effect is $45,000 + $62,000 − $28,000 = $79,000 increase. Choice B incorrectly
adds all three items without recognizing that the decrease in unearned revenue reduces cash.
On the C213 exam, treat liability increases and asset decreases as cash inflows under the
direct method, while liability decreases and asset increases are cash outflows.
, Question 4 of 50
During 2026, Meridian Software Solutions issued 10,000 shares of $2 par value common
stock for $18 per share and repurchased 2,000 shares of its own stock for $22 per share. The
company also declared and paid cash dividends of $75,000. How should these transactions
be classified in the statement of cash flows?
A. The stock issuance is a financing inflow of $180,000, the treasury stock purchase is a
financing outflow of $44,000, and dividends paid are a financing outflow of $75,000
B. The stock issuance is a financing inflow of $160,000, the treasury stock purchase is a
financing outflow of $44,000, and dividends paid are an operating outflow of $75,000
C. The stock issuance is a financing inflow of $180,000, the treasury stock purchase is an
investing outflow of $44,000, and dividends paid are a financing outflow of $75,000
D. The stock issuance is a financing inflow of $180,000, the treasury stock purchase is a
financing outflow of $40,000, and dividends paid are a financing outflow of $75,000
Correct Answer: A
Rationale: Cash received from issuing stock is always a financing inflow calculated at the
issue price (10,000 shares × $18 = $180,000), treasury stock purchases are financing outflows
at the repurchase price (2,000 shares × $22 = $44,000), and dividends paid are financing
outflows under U.S. GAAP. Choice D incorrectly uses the par value ($2) to calculate the stock
issuance inflow rather than the actual cash received. On the C213 exam, par value is
irrelevant for cash flow classification; always use the actual cash exchanged in the
transaction.
Question 5 of 50
Caldwell Industries is preparing its balance sheet at December 31, 2026. The company has
$120,000 in accounts payable, $85,000 in accrued liabilities, $200,000 in short-term notes
payable due March 2027, and $350,000 in bonds payable maturing in June 2027. Management
intends to refinance the bonds with a new long-term debt issuance before the maturity date.
How should these liabilities be classified on the December 31, 2026 balance sheet?
A. Current liabilities of $405,000 and long-term liabilities of $350,000
B. Current liabilities of $755,000 and long-term liabilities of $0
C. Current liabilities of $405,000 and long-term liabilities of $350,000 only if the refinancing
agreement is completed by the balance sheet date
D. Current liabilities of $405,000 and long-term liabilities of $350,000 if management has both
the intent and ability to refinance before maturity
Correct Answer: D
Rationale: Under GAAP, short-term obligations expected to be refinanced on a long-term basis
may be classified as noncurrent if management has both the intent and the ability to
refinance, which typically requires either actual refinancing before the financial statements
