OA Exams

Whatsapp Telegram Facebook Instagram
Contact Us

WGU D102 Practice Exam Questions – Set 2 – Part 2

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

Question 21

Which of the following would be considered a financing activity on the statement of cash flows?

  1. A) Paying for utilities
  2. B) Issuing common stock
  3. C) Purchasing a building
  4. D) Selling inventory

Answer: B) Issuing common stock

Explanation: Financing activities involve obtaining or repaying funds, such as issuing stock or borrowing money.

Question 22

What is the impact of a debit to the inventory account?

  1. A) Increases inventory
  2. B) Decreases inventory
  3. C) Increases liabilities
  4. D) Decreases liabilities

Answer: A) Increases inventory

Explanation: A debit to an asset account like inventory increases its balance.

Question 23

Which type of account typically has a credit balance?

  1. A) Expenses
  2. B) Liabilities
  3. C) Dividends
  4. D) Assets

Answer: B) Liabilities

Explanation: Liabilities are increased by credits and decreased by debits, so they typically have a credit balance.

Question 24

When a company collects cash from a customer for a service not yet performed, which account is credited?

  1. A) Service revenue
  2. B) Cash
  3. C) Accounts receivable
  4. D) Unearned revenue

Answer: D) Unearned revenue

Explanation: The company owes a service in the future, so unearned revenue is credited as a liability.

Question 25

How are dividends recorded in the accounting records?

  1. A) As an expense
  2. B) As a liability
  3. C) As a reduction to retained earnings
  4. D) As a reduction to revenue

Answer: C) As a reduction to retained earnings

Explanation: Dividends reduce retained earnings, which is part of shareholders' equity

Question 26

Which inventory system records inventory continuously as it is bought and sold?

  1. A) Periodic inventory system
  2. B) Perpetual inventory system
  3. C) Weighted average system
  4. D) FIFO inventory system

Answer: B) Perpetual inventory system

Explanation: The perpetual inventory system updates the inventory account continuously after each transaction.

Question 27

How is the double-declining balance depreciation method calculated?

  1. A) Cost ÷ Useful life
  2. B) (2 ÷ Useful life) × Book value
  3. C) Cost – Salvage value ÷ Useful life
  4. D) (1 ÷ Useful life) × Cost

Answer: B) (2 ÷ Useful life) × Book value

Explanation: Double-declining balance is an accelerated depreciation method that multiplies the straight-line rate by 2.

Question 28

What is the purpose of a post-closing trial balance?

  1. A) To ensure that debits equal credits before closing entries are made
  2. B) To verify that all nominal accounts are closed
  3. C) To prepare for the next accounting cycle
  4. D) To record adjustments

Answer: B) To verify that all nominal accounts are closed

Explanation: The post-closing trial balance ensures that all temporary accounts have been closed and only real accounts remain.

Question 29

Which of the following is NOT included in the cost of inventory?

  1. A) Purchase price
  2. B) Freight-in
  3. C) Sales commissions
  4. D) Import duties

Answer: C) Sales commissions

Explanation: Sales commissions are not part of the cost of inventory; they are operating expenses.

Question 30

Which of the following is a contra-revenue account?

  1. A) Sales returns and allowances
  2. B) Accumulated depreciation
  3. C) Cost of goods sold
  4. D) Prepaid expenses

Answer: A) Sales returns and allowances

Explanation: Sales returns and allowances reduce total sales revenue, so it is classified as a contra-revenue account.

Question 31

What is the journal entry when a company makes a payment on a previously accrued liability?

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

Answer: A) Debit accrued liability, credit cash

Explanation: The accrued liability is reduced (debited) and cash is credited when the payment is made.

Question 32

Which of the following accounts would be considered a nominal account?

  1. A) Inventory
  2. B) Retained earnings
  3. C) Accounts payable
  4. D) Interest expense

Answer: D) Interest expense

Explanation: Nominal accounts are temporary accounts that are closed at the end of the accounting period, such as expenses and revenues.

Question 33

On January 1, a company purchased $5,000 of inventory on account. What is the correct journal entry?

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

Answer: A) Debit inventory, credit accounts payable

Explanation: The company increases inventory and increases accounts payable (a liability) because the purchase was made on credit.

Question 34

What is the impact of issuing stock on the financial statements?

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

Answer: C) Increases assets, increases equity

Explanation: Issuing stock increases cash (an asset) and increases equity through additional paid-in capital.

Question 35

When a company makes a sale on credit, which account is debited?

  1. A) Cash
  2. B) Accounts receivable
  3. C) Sales revenue
  4. D) Unearned revenue

Answer: B) Accounts receivable

Explanation: When a sale is made on credit, accounts receivable is debited because the company is owed money.

Question 36

What is the correct adjusting entry when a company earns revenue that was previously recorded as unearned revenue?

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

Answer: A) Debit unearned revenue, credit service revenue

Explanation: As the revenue is earned, the liability (unearned revenue) is decreased and service revenue is increased.

Question 37

What is goodwill classified as on the balance sheet?

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

Answer: D) Intangible asset

Explanation: Goodwill is an intangible asset because it represents the excess of purchase price over the fair value of identifiable assets.

Question 38

How should research and development costs be treated in financial statements?

  1. A) Capitalized and amortized over 10 years
  2. B) Expensed as incurred
  3. C) Recorded as an intangible asset
  4. D) Amortized over 20 years

Answer: B) Expensed as incurred

Explanation: R&D costs are typically expensed when incurred because the future economic benefit is uncertain.

Question 39

Which of the following would result in a credit to accounts payable?

  1. A) Paying for a purchase made on account
  2. B) Purchasing inventory on credit
  3. C) Returning goods to a supplier
  4. D) Recording depreciation

Answer: B) Purchasing inventory on credit

Explanation: When inventory is purchased on credit, accounts payable is credited to reflect the liability.

Question 40

Which of the following is classified as a non-current asset?

  1. A) Prepaid insurance
  2. B) Accounts receivable
  3. C) Office building
  4. D) Inventory

Answer: C) Office building

Explanation: Office buildings are considered non-current assets because they are long-term investments used in business operations.

Complete the Captcha to view next question set.

If this exam is giving you a hard time, let us be your helping hand. Contact us, and we'll provide the assistance you need to pass and move forward.

Tags

Prev Post
WGU D102 Practice Exam Questions – Set 2 – Part 1
Next Post
WGU D102 Practice Exam Questions – Set 2 – Part 3