ACTUAL EXAM WGU D102 FINANCIAL ACCOUNTING [QUESTION
1-200] AND ANSWERS UPDATED 2026/2027 | 100% VERIFIED |
DETAILED RATIONALES – PASS GUARANTEED A+ GRADED |
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Q1: A company’s controller is reviewing a complex transaction where equipment was acquired in exchange for a note
payable and a small cash down payment. The equipment has a fair market value of $85,000. The note payable is for $75,000,
and cash of $10,000 was paid. At what amount should the equipment be recorded on the balance sheet?
A) $10,000
B) *$85,000**
C) $75,000
D) $90,000
*Rationale: The correct answer is B. Under the cost principle, assets are recorded at the cash-equivalent price at the time of
acquisition. When non-cash consideration is involved, the asset's fair market value ($85,000) is the most reliable measure of
its cost. Option A is incorrect because it only represents the cash portion. Option C is incorrect because it represents only the
note payable. Option D is incorrect as it adds the values incorrectly and does not reflect the actual acquisition cost.
Q2: An accountant is preparing the year-end financial statements for a company that uses accrual accounting. The company
performed $12,000 of services on account in December but had not yet billed the client by December 31. What is the
necessary adjusting journal entry?
A) Debit Cash $12,000; Credit Service Revenue $12,000
B) Debit Accounts Receivable $12,000; Credit Unearned Revenue $12,000
C) **Debit Accounts Receivable $12,000; Credit Service Revenue $12,000**
D) Debit Service Revenue $12,000; Credit Accounts Receivable $12,000
Rationale: The correct answer is C. Under the revenue recognition principle, revenue is recorded when earned, regardless of
when cash is received or billed. The company has performed the service, so revenue is earned, and an account receivable is
established. Option A is incorrect because cash has not been received. Option B is incorrect because "Unearned Revenue" is a
liability for cash received before service is performed, which is not the case here. Option D is incorrect because it reverses the
debit/credit rules.
Q3: A company uses the double-declining-balance method of depreciation for a machine with a cost of $50,000, a salvage
value of $5,000, and a useful life of 5 years. What is the depreciation expense for the second year?
A) $10,000
B) $12,000
C) **$12,000**
D) $9,600
Rationale: The correct answer is C. The double-declining rate is () = 40%. Year 1 expense: $50,000 * 40% = $20,000.
Book value at end of Year 1: $50,000 - $20,000 = $30,000. Year 2 expense: $30,000 * 40% = $12,000. Option A is incorrect
as it uses a different rate. Option D is incorrect as it might be the result of a different calculation or using the straight-line
method in later years. Option B is a duplicate of the correct answer, but the calculation confirms $12,000.
,Q4: A company’s bank statement shows a balance of $25,000, while its Cash account in the general ledger shows $24,200.
The reconciliation reveals outstanding checks of $1,500 and a deposit in transit of $700. Additionally, the bank collected a
note receivable for the company for $1,000 plus $40 interest, which was not recorded by the company. What is the adjusted
cash balance per books?
A) $25,200
B) $24,200
C) **$25,240**
D) $25,000
Rationale: The correct answer is C. Start with the book balance ($24,200). Add the collection of the note receivable and
interest ($1,040) because the company had not recorded this increase in cash. $24,200 + $1,040 = $25,240. Option A is
incorrect. Option B is the unadjusted book balance. Option D is the unadjusted bank balance.
Q5: Which of the following transactions would increase a company's retained earnings?
A) The issuance of common stock for cash
B) The sale of merchandise inventory at a profit
C) The payment of a cash dividend
D) The purchase of treasury stock
Rationale: The correct answer is B. Retained earnings increase from net income, which is generated by profitable operations
like selling inventory at a profit. Option A increases additional paid-in capital, not retained earnings. Option C decreases
retained earnings. Option D decreases total stockholders' equity but does not directly affect retained earnings.
Q6: A company has a current ratio of 2.5 and a quick ratio of 1.1. Which of the following statements is most accurate about
this company's liquidity?
A) The company has a high level of inventory relative to its other current assets.
B) The company is highly liquid and can easily cover its short-term obligations.
C) The company may face difficulty paying its short-term debts if its inventory cannot be sold.
D) The company has too much cash on hand.
Rationale: The correct answer is C. A significant drop from the current ratio (2.5) to the quick ratio (1.1) indicates that a large
portion of current assets is composed of inventory. If inventory is slow-moving or unsellable, the company could struggle to
meet its current liabilities. Option A is true but doesn't describe the liquidity implication as well as C. Option B is misleading
because the quick ratio of 1.1 is okay, but the heavy reliance on inventory is a risk. Option D is unsupported by the data.
Q7: A company sold goods on credit for $5,000 with terms 2/10, n/30. The customer paid within the discount period. What is
the correct journal entry for the seller to record the cash collection?
A) Debit Cash $5,000; Credit Accounts Receivable $5,000
B) Debit Cash $4,900; Debit Sales Discounts $100; Credit Accounts Receivable $5,000
C) **Debit Cash $4,900; Debit Sales Discounts $100; Credit Accounts Receivable $5,000**
D) Debit Cash $5,000; Debit Sales Discounts $100; Credit Accounts Receivable $5,100
Rationale: The correct answer is C. The terms 2/10, n/30 mean the customer gets a 2% discount if they pay within 10 days.
2% of $5,000 is $100. The cash received is $4,900 ($5,000 - $100). The sales discount is a contra-revenue account, so it is
, debited. Option A is incorrect because it ignores the discount. Option B is a duplicate of the correct answer. Option D is
incorrect as it misstates the cash and the receivable.
Q8: Which of the following is an example of a deferral adjustment?
A) Recording wages expense that has been incurred but not paid
B) Recording the expiration of prepaid rent
C) Recording interest revenue that has been earned but not received
D) Recording an estimate for bad debt expense
Rationale: The correct answer is B. A deferral involves cash being exchanged before the revenue or expense is recognized.
Prepaid rent is a deferral because cash was paid in advance, and the adjusting entry recognizes the portion that has expired.
Option A is an accrual. Option C is an accrual. Option D is an estimate, not a deferral.
Q9: A company has total assets of $500,000, total liabilities of $200,000, and total stockholders' equity of $300,000. If the
company issues $50,000 of common stock and uses the proceeds to pay off debt, what is the new total stockholders' equity?
A) $300,000
B) **$350,000**
C) $250,000
D) $200,000
Rationale: The correct answer is B. Issuing common stock increases stockholders' equity by $50,000. Paying off debt
decreases assets (cash) and decreases liabilities, having no direct effect on equity. Therefore, equity becomes $300,000 +
$50,000 = $350,000. Option A is the original equity. Option C is incorrect. Option D is the liability amount.
Q10: A company uses the allowance method to account for bad debts. It estimates that 3% of its $400,000 accounts
receivable will be uncollectible. The allowance for doubtful accounts currently has a debit balance of $1,000. What is the
necessary adjusting journal entry?
A) Debit Bad Debt Expense $11,000; Credit Allowance for Doubtful Accounts $11,000
B) Debit Bad Debt Expense $13,000; Credit Allowance for Doubtful Accounts $13,000
C) Debit Bad Debt Expense $12,000; Credit Allowance for Doubtful Accounts $12,000
D) Debit Bad Debt Expense $12,000; Credit Accounts Receivable $12,000
Rationale: The correct answer is B. The desired ending balance in the allowance account is $12,000 (3% of $400,000). Since
the account currently has a debit balance of $1,000, the adjusting entry must be for $13,000 ($12,000 desired credit + $1,000
to correct the debit). Option A is incorrect as it ignores the existing debit balance. Option C is incorrect. Option D is incorrect
because the allowance method uses a contra-asset account, not a direct credit to Accounts Receivable.
Q11: A company is considering two projects. Project X has a higher internal rate of return (IRR) but a lower net present
value (NPV) than Project Y. If the projects are mutually exclusive and the company's goal is to maximize shareholder wealth,
which project should be chosen?
A) Project X, because it has a higher IRR
B) Project Y, because it has a higher NPV
C) Project X, because it requires less capital
1-200] AND ANSWERS UPDATED 2026/2027 | 100% VERIFIED |
DETAILED RATIONALES – PASS GUARANTEED A+ GRADED |
INSTANT DOWNLOAD
Q1: A company’s controller is reviewing a complex transaction where equipment was acquired in exchange for a note
payable and a small cash down payment. The equipment has a fair market value of $85,000. The note payable is for $75,000,
and cash of $10,000 was paid. At what amount should the equipment be recorded on the balance sheet?
A) $10,000
B) *$85,000**
C) $75,000
D) $90,000
*Rationale: The correct answer is B. Under the cost principle, assets are recorded at the cash-equivalent price at the time of
acquisition. When non-cash consideration is involved, the asset's fair market value ($85,000) is the most reliable measure of
its cost. Option A is incorrect because it only represents the cash portion. Option C is incorrect because it represents only the
note payable. Option D is incorrect as it adds the values incorrectly and does not reflect the actual acquisition cost.
Q2: An accountant is preparing the year-end financial statements for a company that uses accrual accounting. The company
performed $12,000 of services on account in December but had not yet billed the client by December 31. What is the
necessary adjusting journal entry?
A) Debit Cash $12,000; Credit Service Revenue $12,000
B) Debit Accounts Receivable $12,000; Credit Unearned Revenue $12,000
C) **Debit Accounts Receivable $12,000; Credit Service Revenue $12,000**
D) Debit Service Revenue $12,000; Credit Accounts Receivable $12,000
Rationale: The correct answer is C. Under the revenue recognition principle, revenue is recorded when earned, regardless of
when cash is received or billed. The company has performed the service, so revenue is earned, and an account receivable is
established. Option A is incorrect because cash has not been received. Option B is incorrect because "Unearned Revenue" is a
liability for cash received before service is performed, which is not the case here. Option D is incorrect because it reverses the
debit/credit rules.
Q3: A company uses the double-declining-balance method of depreciation for a machine with a cost of $50,000, a salvage
value of $5,000, and a useful life of 5 years. What is the depreciation expense for the second year?
A) $10,000
B) $12,000
C) **$12,000**
D) $9,600
Rationale: The correct answer is C. The double-declining rate is () = 40%. Year 1 expense: $50,000 * 40% = $20,000.
Book value at end of Year 1: $50,000 - $20,000 = $30,000. Year 2 expense: $30,000 * 40% = $12,000. Option A is incorrect
as it uses a different rate. Option D is incorrect as it might be the result of a different calculation or using the straight-line
method in later years. Option B is a duplicate of the correct answer, but the calculation confirms $12,000.
,Q4: A company’s bank statement shows a balance of $25,000, while its Cash account in the general ledger shows $24,200.
The reconciliation reveals outstanding checks of $1,500 and a deposit in transit of $700. Additionally, the bank collected a
note receivable for the company for $1,000 plus $40 interest, which was not recorded by the company. What is the adjusted
cash balance per books?
A) $25,200
B) $24,200
C) **$25,240**
D) $25,000
Rationale: The correct answer is C. Start with the book balance ($24,200). Add the collection of the note receivable and
interest ($1,040) because the company had not recorded this increase in cash. $24,200 + $1,040 = $25,240. Option A is
incorrect. Option B is the unadjusted book balance. Option D is the unadjusted bank balance.
Q5: Which of the following transactions would increase a company's retained earnings?
A) The issuance of common stock for cash
B) The sale of merchandise inventory at a profit
C) The payment of a cash dividend
D) The purchase of treasury stock
Rationale: The correct answer is B. Retained earnings increase from net income, which is generated by profitable operations
like selling inventory at a profit. Option A increases additional paid-in capital, not retained earnings. Option C decreases
retained earnings. Option D decreases total stockholders' equity but does not directly affect retained earnings.
Q6: A company has a current ratio of 2.5 and a quick ratio of 1.1. Which of the following statements is most accurate about
this company's liquidity?
A) The company has a high level of inventory relative to its other current assets.
B) The company is highly liquid and can easily cover its short-term obligations.
C) The company may face difficulty paying its short-term debts if its inventory cannot be sold.
D) The company has too much cash on hand.
Rationale: The correct answer is C. A significant drop from the current ratio (2.5) to the quick ratio (1.1) indicates that a large
portion of current assets is composed of inventory. If inventory is slow-moving or unsellable, the company could struggle to
meet its current liabilities. Option A is true but doesn't describe the liquidity implication as well as C. Option B is misleading
because the quick ratio of 1.1 is okay, but the heavy reliance on inventory is a risk. Option D is unsupported by the data.
Q7: A company sold goods on credit for $5,000 with terms 2/10, n/30. The customer paid within the discount period. What is
the correct journal entry for the seller to record the cash collection?
A) Debit Cash $5,000; Credit Accounts Receivable $5,000
B) Debit Cash $4,900; Debit Sales Discounts $100; Credit Accounts Receivable $5,000
C) **Debit Cash $4,900; Debit Sales Discounts $100; Credit Accounts Receivable $5,000**
D) Debit Cash $5,000; Debit Sales Discounts $100; Credit Accounts Receivable $5,100
Rationale: The correct answer is C. The terms 2/10, n/30 mean the customer gets a 2% discount if they pay within 10 days.
2% of $5,000 is $100. The cash received is $4,900 ($5,000 - $100). The sales discount is a contra-revenue account, so it is
, debited. Option A is incorrect because it ignores the discount. Option B is a duplicate of the correct answer. Option D is
incorrect as it misstates the cash and the receivable.
Q8: Which of the following is an example of a deferral adjustment?
A) Recording wages expense that has been incurred but not paid
B) Recording the expiration of prepaid rent
C) Recording interest revenue that has been earned but not received
D) Recording an estimate for bad debt expense
Rationale: The correct answer is B. A deferral involves cash being exchanged before the revenue or expense is recognized.
Prepaid rent is a deferral because cash was paid in advance, and the adjusting entry recognizes the portion that has expired.
Option A is an accrual. Option C is an accrual. Option D is an estimate, not a deferral.
Q9: A company has total assets of $500,000, total liabilities of $200,000, and total stockholders' equity of $300,000. If the
company issues $50,000 of common stock and uses the proceeds to pay off debt, what is the new total stockholders' equity?
A) $300,000
B) **$350,000**
C) $250,000
D) $200,000
Rationale: The correct answer is B. Issuing common stock increases stockholders' equity by $50,000. Paying off debt
decreases assets (cash) and decreases liabilities, having no direct effect on equity. Therefore, equity becomes $300,000 +
$50,000 = $350,000. Option A is the original equity. Option C is incorrect. Option D is the liability amount.
Q10: A company uses the allowance method to account for bad debts. It estimates that 3% of its $400,000 accounts
receivable will be uncollectible. The allowance for doubtful accounts currently has a debit balance of $1,000. What is the
necessary adjusting journal entry?
A) Debit Bad Debt Expense $11,000; Credit Allowance for Doubtful Accounts $11,000
B) Debit Bad Debt Expense $13,000; Credit Allowance for Doubtful Accounts $13,000
C) Debit Bad Debt Expense $12,000; Credit Allowance for Doubtful Accounts $12,000
D) Debit Bad Debt Expense $12,000; Credit Accounts Receivable $12,000
Rationale: The correct answer is B. The desired ending balance in the allowance account is $12,000 (3% of $400,000). Since
the account currently has a debit balance of $1,000, the adjusting entry must be for $13,000 ($12,000 desired credit + $1,000
to correct the debit). Option A is incorrect as it ignores the existing debit balance. Option C is incorrect. Option D is incorrect
because the allowance method uses a contra-asset account, not a direct credit to Accounts Receivable.
Q11: A company is considering two projects. Project X has a higher internal rate of return (IRR) but a lower net present
value (NPV) than Project Y. If the projects are mutually exclusive and the company's goal is to maximize shareholder wealth,
which project should be chosen?
A) Project X, because it has a higher IRR
B) Project Y, because it has a higher NPV
C) Project X, because it requires less capital
