WGU D102 FINANCIAL ACCOUNTING
FINAL EXAM STUDY GUIDE
QUESTIONS AND ANSWERS 100%
VERIFIED 2026/2027
1. A company purchases equipment for $50,000 by paying $10,000 in cash and signing a note
payable for the remainder. How does this transaction affect the accounting equation?
A. Assets increase by $50,000; Liabilities increase by $40,000; Equity increases by $10,000
B. Assets increase by $40,000; Liabilities increase by $40,000; Equity remains unchanged
C. Assets increase by $40,000; Liabilities increase by $50,000; Equity decreases by $10,000
D. Assets increase by $50,000; Liabilities increase by $50,000; Equity remains unchanged
Answer: B
Conceptual Explanation: Equipment (Asset) increases by $50,000, Cash (Asset) decreases
by $10,000, resulting in a net asset increase of $40,000. Notes Payable (Liability) increases
by $40,000. The equation remains balanced.
2. Which of the following accounts is increased with a debit?
A. Unearned Revenue
B. Accumulated Depreciation
C. Dividends
,D. Common Stock
Answer: C
Conceptual Explanation: Dividends, Expenses, and Assets (DEA) are increased with
debits. Unearned Revenue and Common Stock are credits, and Accumulated Depreciation is
a contra-asset (credit balance).
3. Under the accrual basis of accounting, when is revenue recognized?
A. When cash is received from the customer
B. At the end of the fiscal year
C. When the performance obligation is satisfied
D. When the invoice is sent to the customer
Answer: C
Conceptual Explanation: The revenue recognition principle states that revenue should be
recognized in the period in which the performance obligation is satisfied, regardless of
when cash is received.
4. If an adjusting entry for accrued wages is omitted at year-end, what is the effect on the
financial statements?
A. Assets are overstated and Net Income is understated
B. Liabilities are overstated and Equity is understated
C. Expenses are understated and Net Income is overstated
, D. Expenses are overstated and Liabilities are understated
Answer: C
Conceptual Explanation: Omitting an accrued expense means the expense is not recorded
(understated), which leads to an overstatement of Net Income and Retained Earnings.
5. A company has a beginning Retained Earnings of $100,000, Net Income of $40,000, and
declared Dividends of $10,000. What is the ending Retained Earnings?
A. $150,000
B. $140,000
C. $110,000
D. $130,000
Answer: D
Conceptual Explanation: Ending Retained Earnings = Beginning Retained Earnings + Net
Income - Dividends ($100,000 + $40,000 - $10,000 = $130,000).
6. Which financial statement is prepared first in the accounting cycle?
A. Balance Sheet
B. Statement of Retained Earnings
C. Income Statement
D. Statement of Cash Flows
FINAL EXAM STUDY GUIDE
QUESTIONS AND ANSWERS 100%
VERIFIED 2026/2027
1. A company purchases equipment for $50,000 by paying $10,000 in cash and signing a note
payable for the remainder. How does this transaction affect the accounting equation?
A. Assets increase by $50,000; Liabilities increase by $40,000; Equity increases by $10,000
B. Assets increase by $40,000; Liabilities increase by $40,000; Equity remains unchanged
C. Assets increase by $40,000; Liabilities increase by $50,000; Equity decreases by $10,000
D. Assets increase by $50,000; Liabilities increase by $50,000; Equity remains unchanged
Answer: B
Conceptual Explanation: Equipment (Asset) increases by $50,000, Cash (Asset) decreases
by $10,000, resulting in a net asset increase of $40,000. Notes Payable (Liability) increases
by $40,000. The equation remains balanced.
2. Which of the following accounts is increased with a debit?
A. Unearned Revenue
B. Accumulated Depreciation
C. Dividends
,D. Common Stock
Answer: C
Conceptual Explanation: Dividends, Expenses, and Assets (DEA) are increased with
debits. Unearned Revenue and Common Stock are credits, and Accumulated Depreciation is
a contra-asset (credit balance).
3. Under the accrual basis of accounting, when is revenue recognized?
A. When cash is received from the customer
B. At the end of the fiscal year
C. When the performance obligation is satisfied
D. When the invoice is sent to the customer
Answer: C
Conceptual Explanation: The revenue recognition principle states that revenue should be
recognized in the period in which the performance obligation is satisfied, regardless of
when cash is received.
4. If an adjusting entry for accrued wages is omitted at year-end, what is the effect on the
financial statements?
A. Assets are overstated and Net Income is understated
B. Liabilities are overstated and Equity is understated
C. Expenses are understated and Net Income is overstated
, D. Expenses are overstated and Liabilities are understated
Answer: C
Conceptual Explanation: Omitting an accrued expense means the expense is not recorded
(understated), which leads to an overstatement of Net Income and Retained Earnings.
5. A company has a beginning Retained Earnings of $100,000, Net Income of $40,000, and
declared Dividends of $10,000. What is the ending Retained Earnings?
A. $150,000
B. $140,000
C. $110,000
D. $130,000
Answer: D
Conceptual Explanation: Ending Retained Earnings = Beginning Retained Earnings + Net
Income - Dividends ($100,000 + $40,000 - $10,000 = $130,000).
6. Which financial statement is prepared first in the accounting cycle?
A. Balance Sheet
B. Statement of Retained Earnings
C. Income Statement
D. Statement of Cash Flows
