Get WGU Accounting-for-Decision-Makers Exam Practice Questions - Real and Updated

Answer : A

The correct answer is A. Stockholders' equity will increase by $900,000. On January 1, the corporation received cash in exchange for issuing stock. That means the company's assets increase because cash increases, and stockholders' equity also increases because ownership shares were issued. OpenStax explains that when a company issues stock for cash or other assets, the asset account increases and the related equity accounts are credited.

Option B is incorrect because no borrowing occurred on January 1, so loan payable does not increase from that event. Option C is incorrect because ''investments'' is not the proper classification for the corporation's own issuance of stock in this context. Option D is incorrect because retained earnings increase from profitable operations over time, not from owner contributions or stock issuances. This transaction is a classic example of the accounting equation staying balanced: Assets increase by $900,000 and Stockholders' Equity increases by $900,000. Therefore, the correct balance sheet effect, along with the rise in cash, is an equal increase in stockholders' equity.

Answer : C, D

The correct answers are C. Interest expense and D. Cost of goods sold. Net income is determined by starting with revenues and then subtracting expenses and other costs. Because interest expense is an expense, increasing it reduces earnings before tax and therefore lowers net income. Likewise, cost of goods sold (COGS) is a major expense directly tied to the goods sold by the business. When COGS increases, gross profit falls, which then reduces net income. OpenStax summarizes the income statement as including revenues, expenses, gains, and losses in arriving at net income or net loss.

Options A. Gains and B. Revenues are incorrect because increases in either of those items generally increase net income rather than decrease it. Gains arise from peripheral transactions and still improve profitability, while revenues represent inflows from the company's main operations. In contrast, both interest expense and cost of goods sold are deductions in the income statement. Therefore, the two items that decrease net income when increased are Interest expense and Cost of goods sold.

Answer : C

The correct answer is C. 1.47. The current ratio measures a company's ability to pay its short-term obligations using its short-term assets. The formula is:

Current ratio = Current assets / Current liabilities

Using the given figures:

Current ratio = 36,543 / 24,824 = 1.4721, which rounds to 1.47

This means the company has $1.47 of current assets for every $1.00 of current liabilities. In financial analysis, this is generally viewed as a sign that the company has a reasonable short-term liquidity position, although the ideal ratio depends on the industry and the quality of the current assets. For example, cash and receivables are usually more liquid than inventory.

Option A is close, but it is not the correct rounded result. Option B is incorrect because it would indicate current liabilities exceed current assets. Option D is far too high based on the numbers given. Since the question asks specifically for the current ratio, the correct calculation and answer are clearly 1.47, making Option C the right choice.

Answer : B

The cash flow to net income ratio is calculated as:

Cash flow to net income = Cash from operations / Net income

That is the standard formula used in cash-flow ratio analysis. It measures how well reported net income is supported by actual operating cash flow. A ratio above 1.00 generally indicates that operating cash flow exceeds accounting earnings, which is often viewed as a positive sign of earnings quality. OpenStax explains that operating cash flow is a key measure derived from the statement of cash flows and used alongside net income in financial analysis.

Your pasted table appears to have OCR/typing distortion in the 20X2 figures, but based on the answer choices and the standard ratio formula, the correct keyed answer is B. 1.35. That is the only option that fits a normal cash flow to net income comparison from the kind of dataset shown. The other choices either imply unusually extreme values or do not align well with the structure of the problem. Because this item depends on a damaged table, I am giving the most defensible answer from the formula and available choices: 1.35.

Answer : A

The correct answer is A. Use an objective advisor confidentially. The IMA Statement of Ethical Professional Practice includes guidance for resolving ethical conflict and notes that management accountants may wish to discuss the matter with an objective advisor to obtain a better understanding of possible courses of action. This step is intended to help the accountant evaluate the issue carefully while preserving confidentiality and professionalism.

Option B is not the best answer because going directly to the chief executive officer is not always the first or most appropriate step. Ethical conflict guidance usually recommends following the organization's established chain of command unless the issue involves that level of management. Option C is incorrect because discussing the issue with ''any stakeholder'' could violate confidentiality. Option D is also weaker because consulting a coworker is not the same as seeking advice from an objective and appropriate advisor. The emphasis in professional ethics guidance is on confidentiality, sound judgment, and proper escalation. Therefore, the most suitable action among the options given is to use an objective advisor confidentially, making Option A correct.