WGU C201 BUSINESS ACUMEN PRACTICE EXAM 2026 | 58
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Section 1: Financial Accounting (12 Questions)
Q1: A company's balance sheet shows total assets of $850,000 and total liabilities of
$320,000. What is the amount of stockholders' equity?
A. $530,000 [CORRECT]
B. $1,170,000
C. $320,000
D. $850,000
Correct Answer: A
Rationale: The fundamental accounting equation states: Assets = Liabilities +
Stockholders' Equity. Therefore, Stockholders' Equity = Assets - Liabilities = $850,000 -
$320,000 = $530,000. Option B incorrectly adds liabilities to assets. Option C simply
restates liabilities. Option D restates total assets without calculation.
Q2: Which financial statement provides information about a company's financial
position at a specific point in time?
A. Income Statement
B. Statement of Cash Flows
,C. Balance Sheet [CORRECT]
D. Statement of Retained Earnings
Correct Answer: C
Rationale: The balance sheet (statement of financial position) reports assets, liabilities,
and equity at a specific date, following the accounting equation. The income statement
(A) covers a period of time showing revenues and expenses. The statement of cash
flows (B) shows cash movements over time. The statement of retained earnings (D)
explains changes in retained earnings over a period.
Q3: A company reports net income of $125,000 for the year. Beginning retained
earnings were $45,000, and the company paid $30,000 in dividends. What is the ending
retained earnings balance?
A. $95,000
B. $140,000 [CORRECT]
C. $170,000
D. $200,000
Correct Answer: B
Rationale: Ending Retained Earnings = Beginning Retained Earnings + Net Income -
Dividends = $45,000 + $125,000 - $30,000 = $140,000. Option A subtracts net income
instead of adding it. Option C adds dividends instead of subtracting. Option D
incorrectly adds all figures without subtracting dividends.
,Q4: Which accounting principle requires that expenses be matched with the revenues
they help generate in the same accounting period?
A. Revenue Recognition Principle
B. Matching Principle [CORRECT]
C. Historical Cost Principle
D. Full Disclosure Principle
Correct Answer: B
Rationale: The matching principle (expense recognition principle) dictates that
expenses be recorded in the same period as the revenues they help generate, ensuring
accurate profit measurement. The revenue recognition principle (A) governs when
revenue is recorded. Historical cost (C) requires assets be recorded at original purchase
price. Full disclosure (D) requires reporting of all relevant information.
Q5: A company purchased equipment for $50,000 with a useful life of 5 years and no
salvage value. Using straight-line depreciation, what is the annual depreciation
expense?
A. $5,000
B. $10,000 [CORRECT]
C. $12,500
D. $50,000
Correct Answer: B
, Rationale: Straight-line depreciation = (Cost - Salvage Value) / Useful Life = ($50,000 -
$0) / 5 years = $10,000 per year. Option A incorrectly divides by 10. Option C uses
double-declining balance methodology incorrectly. Option D fails to allocate cost over
the useful life.
Q6: Which of the following would be classified as a current asset on the balance sheet?
A. Equipment
B. Land
C. Accounts Receivable [CORRECT]
D. Long-term Investments
Correct Answer: C
Rationale: Accounts receivable represents amounts owed by customers expected to be
collected within one year or the operating cycle, meeting the definition of a current
asset. Equipment (A) and land (B) are property, plant, and equipment (long-term assets).
Long-term investments (D) are non-current by definition.
Q7: A company's income statement shows sales revenue of $500,000, cost of goods
sold of $300,000, and operating expenses of $120,000. What is the gross profit?
A. $80,000
B. $200,000 [CORRECT]
C. $380,000
D. $500,000
Questions with Complete Solutions & Rationales | MBA Prep
| Pass Guaranteed - A+ Graded
Section 1: Financial Accounting (12 Questions)
Q1: A company's balance sheet shows total assets of $850,000 and total liabilities of
$320,000. What is the amount of stockholders' equity?
A. $530,000 [CORRECT]
B. $1,170,000
C. $320,000
D. $850,000
Correct Answer: A
Rationale: The fundamental accounting equation states: Assets = Liabilities +
Stockholders' Equity. Therefore, Stockholders' Equity = Assets - Liabilities = $850,000 -
$320,000 = $530,000. Option B incorrectly adds liabilities to assets. Option C simply
restates liabilities. Option D restates total assets without calculation.
Q2: Which financial statement provides information about a company's financial
position at a specific point in time?
A. Income Statement
B. Statement of Cash Flows
,C. Balance Sheet [CORRECT]
D. Statement of Retained Earnings
Correct Answer: C
Rationale: The balance sheet (statement of financial position) reports assets, liabilities,
and equity at a specific date, following the accounting equation. The income statement
(A) covers a period of time showing revenues and expenses. The statement of cash
flows (B) shows cash movements over time. The statement of retained earnings (D)
explains changes in retained earnings over a period.
Q3: A company reports net income of $125,000 for the year. Beginning retained
earnings were $45,000, and the company paid $30,000 in dividends. What is the ending
retained earnings balance?
A. $95,000
B. $140,000 [CORRECT]
C. $170,000
D. $200,000
Correct Answer: B
Rationale: Ending Retained Earnings = Beginning Retained Earnings + Net Income -
Dividends = $45,000 + $125,000 - $30,000 = $140,000. Option A subtracts net income
instead of adding it. Option C adds dividends instead of subtracting. Option D
incorrectly adds all figures without subtracting dividends.
,Q4: Which accounting principle requires that expenses be matched with the revenues
they help generate in the same accounting period?
A. Revenue Recognition Principle
B. Matching Principle [CORRECT]
C. Historical Cost Principle
D. Full Disclosure Principle
Correct Answer: B
Rationale: The matching principle (expense recognition principle) dictates that
expenses be recorded in the same period as the revenues they help generate, ensuring
accurate profit measurement. The revenue recognition principle (A) governs when
revenue is recorded. Historical cost (C) requires assets be recorded at original purchase
price. Full disclosure (D) requires reporting of all relevant information.
Q5: A company purchased equipment for $50,000 with a useful life of 5 years and no
salvage value. Using straight-line depreciation, what is the annual depreciation
expense?
A. $5,000
B. $10,000 [CORRECT]
C. $12,500
D. $50,000
Correct Answer: B
, Rationale: Straight-line depreciation = (Cost - Salvage Value) / Useful Life = ($50,000 -
$0) / 5 years = $10,000 per year. Option A incorrectly divides by 10. Option C uses
double-declining balance methodology incorrectly. Option D fails to allocate cost over
the useful life.
Q6: Which of the following would be classified as a current asset on the balance sheet?
A. Equipment
B. Land
C. Accounts Receivable [CORRECT]
D. Long-term Investments
Correct Answer: C
Rationale: Accounts receivable represents amounts owed by customers expected to be
collected within one year or the operating cycle, meeting the definition of a current
asset. Equipment (A) and land (B) are property, plant, and equipment (long-term assets).
Long-term investments (D) are non-current by definition.
Q7: A company's income statement shows sales revenue of $500,000, cost of goods
sold of $300,000, and operating expenses of $120,000. What is the gross profit?
A. $80,000
B. $200,000 [CORRECT]
C. $380,000
D. $500,000
