WGU C213 Accounting for Decision Makers Study Guide Solutions 2022-2023

C213 Study Guide Solutions Table of Contents

Chapter 1: Nature and Purpose of Accounting..................................................................... 1

Describe the purpose of accounting................................................................................ 1

Describe the three financial statements.......................................................................... 1

Identify users of financial statements for a particular situation................................... 1

Identify U.S. accounting rules and their origins............................................................. 2

Differentiate the roles of important accreditation organizations.................................. 3

Describe current trends that are causing changes in the field of accounting.......... 3

Chapter 2: Overview of Financial Statements....................................................................... 3

Identify the purposes of financial statements in specific situations........................... 3

Identify components of a balance sheet.......................................................................... 4

Use the accounting equation to calculate total assets, total liabilities, or total stockholders’ equity...................................................................................................................................... 5

Identify components of the income statement................................................................ 5

Identify components of the cash flow statement............................................................ 6

Explain the purpose of notes to financial statements................................................... 6

Describe the purpose of an external audit...................................................................... 7

Explain the concepts of comparability, conservatism, materiality, and articulation.. 7

Chapter 3: Introduction to Financial Statement Analysis..................................................... 8

Recognize the purpose of financial statement analysis and financial ratios........... 8

Compute widely used financial ratios.............................................................................. 8

Interpret widely used financial ratios................................................................................ 8

Calculate cash flow ratios for a given situation.............................................................. 8

Chapter 4: The Balance Sheet............................................................................................... 12

Identify the order of assets, liabilities, and stockholders’ equity accounts on a balance sheet..................................................................................................................................... 12

Record the proper values for items on a balance sheet in a particular situation.... 14

Chapter 5: The Income Statement......................................................................................... 15

Describe the purpose of net income on an income statement.................................. 15

Prepare a simplified income statement.......................................................................... 15

Explain when revenues and expenses are recognized for a particular situation.. 15

Analyze the impact of revenue transactions on the expanded accounting equation and financial statements.......................................................................................................... 16

Evaluate a historical income statement to forecast a future income statement...... 16

Chapter 6: The Statement of Cash Flows............................................................................. 17

Describe the purpose of the statement of cash flows.................................................. 17

Identify the categories of a cash flow statement and cash flow activities included in each category............................................................................................................................... 17

Prepare a simplified statement of cash flows................................................................ 18

Describe the differences between the direct and indirect methods of the cash flow statement............................................................................................................................. 19

Analyze a statement of cash flows to identify operating, investing, or financing activities................................................................................................................................................ 19

Chapter 7: Cash Budgeting.................................................................................................... 20

Evaluate a company’s credit policy................................................................................. 20

Calculate cash collections from cash and credit sales based upon collection history.

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Calculate cash payments for disbursement based upon a company’s payment policy     21

Chapter 8: Internal Controls.................................................................................................... 22

Identify common financial statement errors.................................................................. 22

Recommend the proper internal controls to prevent accidental loss or intentional theft or fraud for a particular situation.......................................................................................... 22

Identify motivations and common techniques used to manage earnings............... 22

Explain the effect of the Sarbanes-Oxley Act on financial reporting........................ 23

Describe the role of auditors and their impact on the integrity of financial statements.     24

Explain the role of the U.S. Securities and Exchange Commission (SEC) in financial reporting............................................................................................................................... 24

Chapter 9: Managerial Accounting and Cost Concepts..................................................... 25

Describe the purpose of management accounting...................................................... 25

Differentiate between management and financial accounting................................. 25

Describe the differences between accounting in a manufacturing environment and

a service environment....................................................................................................... 25

Define common terms and concepts used in management accounting................. 26

Distinguish between product costs and period costs.................................................. 28

Describe the role of key ethical standards in the field of management accounting. 28 Calculate the cost of a product........................................................................................ 28

Differentiate how the types of inventory affect calculations...................................... 28

Explain the difference between job costing and product costing.............................. 28

Chapter 10: Activity-Based-Costing (ABC)........................................................................... 29

Compare and contrast traditional costing to activity-based costing (ABC).............. 29

Identify categories of ABC activities and their related overhead costs..................... 29

Identify appropriate cost drivers for a particular situation............................................ 30

Compute overhead costs under an ABC system.......................................................... 31

Compute product costs under a traditional volume-based costing system.............. 32

Justify a decision about a selling price based on traditional volume-based costing or activity-based costing systems......................................................................................... 32

Chapter 11: Cost-Volume-Profit Analysis (C-V-P)............................................................... 33

Describe cost-volume-profit analysis.............................................................................. 33

Describe how basic cost behavior patterns change as sales volumes change..... 33

Apply cost-volume-profit analysis to demonstrate the effect of changes in variable costs, fixed costs, sales price, and sales volume on profit..................................................... 33

Analyze a cost-volume-profit graph to determine the level of variable costs, fixed costs, break-even point, and profit............................................................................................. 35