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WGU Accounting for Decision Makers C213 VAC2 Sample Questions:

1. Which two items increase net income?
Choose 2 answers.

A) Gain on sale of assets
B) Cost of sales
C) Income tax expense
D) Interest income

2. In September, an airline using accrual accounting received cash from a round-trip ticket sold to a customer for
$1,500. The ticket allowed the customer to fly from Denver to Hawaii in October and from Hawaii back to Denver in November.
When should the airline recognize revenue?

A) Only in November
B) In September, October, and November
C) Only in September
D) In October and November

3. What would be the appropriate cost driver to allocate overhead for a call center?

A) Total material cost
B) Number of customer contacts
C) Total sales dollars
D) Number of labor hours

4. Which technique describes the practice of incurring debt but fully paying the debt over time?

A) Accounting management
B) Profit control
C) Income smoothing
D) Liability deferral

5. 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 $900,000 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%, 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 1 event on the company's balance sheet on that date, along with an increase to cash of $900,000?

A) Investments will increase by $900,000
B) Loan payable will increase by $900,000
C) Retained earnings will increase by $900,000
D) Stockholders' equity will increase by $900,000

Solutions: