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WGU D102 Practice Exam Questions – Set 2 – Part 1

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  • WGU D102 Practice Exam Questions – Set 2 – Part 1
  • web.groovymark@gmail.com
  • December 8, 2024

Question 01

Which account normally has a debit balance?

  1. A) Sales
  2. B) Dividends
  3. C) Accounts Payable
  4. D) Accumulated Depreciation

Answer: B) Dividends

Explanation: Dividends normally have a debit balance because they reduce retained earnings, which is part of equity.

Question 02

How does a company record the payment of salaries to its employees?

  1. A) Debit salaries expense, credit cash
  2. B) Debit cash, credit salaries expense
  3. C) Debit salaries expense, credit accounts payable
  4. D) Debit accounts payable, credit cash

Answer: A) Debit salaries expense, credit cash

Explanation: Salaries are recorded as an expense, which increases with a debit, and the cash account is credited because it decreases when payment is made.

Question 03

What is the effect on the accounting equation when a company borrows cash by signing a note payable?

  1. A) Decreases assets, decreases liabilities
  2. B) Increases assets, increases liabilities
  3. C) Increases assets, increases equity
  4. D) Decreases assets, decreases equity

Answer: B) Increases assets, increases liabilities

Explanation: Borrowing cash increases both the cash account (an asset) and the note payable (a liability).

Question 04

How are revenues typically recorded with debits and credits?

  1. A) As a debit
  2. B) As a credit
  3. C) As a debit when earned and as a credit when received
  4. D) As a credit when earned and as a debit when received

Answer: B) As a credit

Explanation: Revenues increase equity and are recorded as credits because equity increases with credits.

Question 05

On September 1, a company received $12,000 in advance for services to be provided over the next year. What is the correct adjusting entry at the end of December?

  1. A) Debit cash, credit unearned revenue
  2. B) Debit unearned revenue, credit service revenue
  3. C) Debit service revenue, credit unearned revenue
  4. D) Debit accounts receivable, credit service revenue

Answer: B) Debit unearned revenue, credit service revenue

Explanation: The company needs to adjust for services rendered, transferring a portion of unearned revenue to service revenue.

Question 06

Which of the following is classified as a long-term liability?

  1. A) Accounts payable
  2. B) Accrued expenses
  3. C) Bonds payable
  4. D) Salaries payable

Answer: C) Bonds payable

Explanation: Bonds payable typically have repayment terms of several years, making them a long-term liability.

Question 07

Which inventory costing method assumes the first items purchased are the first to be sold?

  1. A) FIFO
  2. B) LIFO
  3. C) Weighted-average
  4. D) Specific identification

Answer: A) FIFO

Explanation: Under FIFO (First In, First Out), the oldest inventory items are sold first, leaving newer items in ending inventory.

Question 08

What type of account is accumulated depreciation?

  1. A) Expense account
  2. B) Contra-asset account
  3. C) Liability account
  4. D) Asset account

Answer: B) Contra-asset account

Explanation: Accumulated depreciation is a contra-asset account that offsets the asset account, reducing its book value over time.

Question 09

What is the proper accounting treatment for a cash dividend declared but not yet paid?

  1. A) Debit dividends, credit cash
  2. B) Debit dividends payable, credit cash
  3. C) Debit dividends, credit dividends payable
  4. D) Debit retained earnings, credit dividends payable

Answer: C) Debit dividends, credit dividends payable

Explanation: When dividends are declared, they are recorded as a liability (dividends payable) until they are paid.

Question 10

Which financial statement reports the financial position of a company at a specific point in time?

  1. A) Income statement
  2. B) Balance sheet
  3. C) Statement of cash flows
  4. D) Statement of retained earnings

Answer: B) Balance sheet

Explanation: The balance sheet reports a company's assets, liabilities, and equity as of a specific date.

Question 11

Which method of depreciation results in the same depreciation expense each year?

  1. A) Units of production
  2. B) Declining balance
  3. C) Straight-line
  4. D) Double declining balance

Answer: C) Straight-line

Explanation: The straight-line method allocates an equal amount of depreciation to each year of the asset's useful life.

Question 12

What type of asset is a patent classified as?

  1. A) Tangible asset
  2. B) Intangible asset
  3. C) Current asset
  4. D) Financial asset

Answer: B) Intangible asset

Explanation: A patent is an intangible asset because it represents a legal right without physical substance.

Question 13

What is the formula for calculating net income?

  1. A) Revenues – Expenses
  2. B) Revenues – Cost of Goods Sold
  3. C) Assets – Liabilities
  4. D) Cash Inflows – Cash Outflows

Answer: A) Revenues - Expenses

Explanation: Net income is calculated by subtracting total expenses from total revenues.

Question 14

Which principle requires that expenses be recognized in the same period as the related revenues?

  1. A) Revenue recognition principle
  2. B) Matching principle
  3. C) Cost principle
  4. D) Consistency principle

Answer: B) Matching principle

Explanation: The matching principle ensures that expenses are reported in the same period as the revenues they help generate.

Question 15

Which account is closed at the end of the accounting period?

  1. A) Equipment
  2. B) Retained earnings
  3. C) Sales revenue
  4. D) Accounts payable

Answer: C) Sales revenue

Explanation: Revenue accounts are temporary accounts that are closed at the end of the accounting period to retained earnings.

Question 16

On December 31, a company recognized $2,000 in wages earned by employees but not yet paid. What is the correct adjusting entry?

  1. A) Debit wages expense, credit wages payable
  2. B) Debit wages expense, credit cash
  3. C) Debit cash, credit wages payable
  4. D) Debit wages payable, credit wages expense

Answer: A) Debit wages expense, credit wages payable

Explanation: The company records an expense for the wages and a liability (wages payable) until payment is made.

Question 17

How are research and development costs typically treated?

  1. A) Expensed when incurred
  2. B) Capitalized as an intangible asset
  3. C) Expensed over the life of the project
  4. D) Expensed only when the project is completed

Answer: A) Expensed when incurred

Explanation: R&D costs are generally expensed as incurred because of the uncertainty of future economic benefits.

Question 18

What does a debit entry to an asset account represent?

  1. A) An increase
  2. B) A decrease
  3. C) No effect
  4. D) A transfer to equity

Answer: A) An increase

Explanation: Asset accounts increase with debits and decrease with credits.

Question 19

Which account is used to record the costs of purchasing inventory?

  1. A) Sales
  2. B) Cost of Goods Sold
  3. C) Accounts payable
  4. D) Retained earnings

Answer: B) Cost of Goods Sold

Explanation: The cost of purchasing inventory is recorded in the Cost of Goods Sold account when the inventory is sold.

Question 20

When does an accountant prepare a trial balance?

  1. A) After closing the books
  2. B) Before journalizing transactions
  3. C) Before preparing the financial statements
  4. D) After the financial statements are prepared

Answer: C) Before preparing the financial statements

Explanation: A trial balance is prepared before financial statements to ensure that debits equal credits.

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