WGU D774 INTRO TO BUSINESS ACCOUNTING EXAM PREP DETAILED PRACTICE QUESTIONS CORRECT ANSWERS and RATIONALES A+ STUDY GUIDE | INSTANT DOWNLOAD

WGU D774 INTRO TO BUSINESS
ACCOUNTING EXAM PREP 2026
2027 DETAILED PRACTICE
QUESTIONS CORRECT ANSWERS
and RATIONALES A+ STUDY
GUIDE | INSTANT DOWNLOAD

1. A retail company purchases inventory on credit from a
major supplier for KSh 500,000. The terms of the invoice
are 2/10, n/30. The company records this transaction
using the perpetual inventory system. How should this
initial transaction be recorded in the general journal?
• A) Debit Inventory KSh 490,000; Credit Accounts Payable
KSh 490,000
• B) Debit Inventory KSh 500,000; Credit Accounts
Payable KSh 500,000 Correct Answer.
Rationale: Under the perpetual inventory system,
purchases are recorded at their full invoice price initially.
Cash discounts are recorded later only if payment occurs
within the discount window, reducing the inventory value
at that specific time.
• C) Debit Purchases KSh 500,000; Credit Cash KSh
500,000
• D) Debit Accounts Payable KSh 500,000; Credit Inventory
KSh 500,000
2. An electronics manufacturing firm purchases a specialized
delivery vehicle for KSh 1,200,000. The firm estimates the
vehicle will have a useful life of 5 years and a residual
value of KSh 200,000. If the firm utilizes the straight-line

, method, what is the journal entry to record depreciation at
the end of Year 1?
• A) Debit Depreciation Expense KSh 240,000; Credit
Accumulated Depreciation KSh 240,000
• B) Debit Accumulated Depreciation KSh 200,000; Credit
Depreciation Expense KSh 200,000
• C) Debit Depreciation Expense KSh 200,000;
Credit Accumulated Depreciation KSh 200,000
Correct Answer. Rationale: Straight-line
depreciation is calculated as (Cost - Salvage Value) /
Useful Life. Here, (1,200,000 - 200,000) / 5 equals KSh
200,000. Depreciation Expense is debited and
Accumulated Depreciation is credited.
• D) Debit Depreciation Expense KSh 240,000; Credit
Delivery Vehicle KSh 240,000
3. A consulting firm collects KSh 300,000 from a corporate
client in advance for a six-month IT modernization project
starting on November 1. At the time of receipt, the
accountant correctly debited Cash and credited Unearned
Revenue. What adjusting entry must be made on
December 31?
• A) Debit Unearned Revenue KSh 300,000; Credit Service
Revenue KSh 300,000
• B) Debit Unearned Revenue KSh 100,000; Credit
Service Revenue KSh 100,000 Correct Answer.
Rationale: By December 31, two months (November
and December) out of the six months have passed. The
earned portion is (KSh 300,) * 2 = KSh 100,000,
which moves from the liability account to revenue.
• C) Debit Service Revenue KSh 100,000; Credit Unearned
Revenue KSh 100,000

,• D) Debit Cash KSh 100,000; Credit Service Revenue KSh
100,000
4. During an audit of a local distribution center, the
management team reviews the basic accounting equation.
The business has total assets of KSh 8,500,000 and total
equity of KSh 3,200,000. What is the total amount of
liabilities held by this distribution center?

• A) KSh 5,300,000 Correct Answer. Rationale:
The fundamental accounting equation is Assets =
Liabilities + Equity. Rearranging the equation to solve for
liabilities yields Liabilities = Assets - Equity. KSh
8,500,000 - KSh 3,200,000 = KSh 5,300,000.
• B) KSh 11,700,000
• C) KSh 3,200,000
• D) KSh 5,000,000
5. A commercial bakery operates under accrual accounting
rules. In May, the bakery delivers KSh 150,000 worth of
specialty baked goods to a supermarket chain. The
supermarket chain does not pay the invoice until July. In
which month should the bakery record the revenue?

• A) May Correct Answer. Rationale: Under the
revenue recognition principle of accrual accounting,
revenue must be recognized in the accounting period in
which the performance obligation is satisfied, regardless
of when cash is collected.
• B) July
• C) June
• D) Evenly split between May and July
6. A firm purchases a multi-year property insurance policy
on January 1 for KSh 120,000 covering a 12-month period,

, recording it entirely as Prepaid Insurance. At the end of
the first quarter (March 31), no adjustments have been
made. What is the impact on the financial statements if
this adjustment is completely omitted?
• A) Expenses are overstated and assets are understated.
• B) Assets are overstated and net income is
overstated. Correct Answer. Rationale:
Omitting the adjusting entry to record KSh 30,000 of
expired insurance leaves Prepaid Insurance (an asset)
artificially high and Insurance Expense too low, which
inflates net income.
• C) Liabilities are understated and equity is overstated.
• D) Assets are understated and net income is understated.
7. While reconciling the monthly bank statement, the
internal accountant discovers that a check written to a
vendor for KSh 45,000 was mistakenly recorded in the
company’s cash ledger as KSh 54,000. How should this
error be handled on the bank reconciliation?
• A) Deduct KSh 9,000 from the bank balance.

• B) Add KSh 9,000 to the book balance. Correct
Answer. Rationale: The company recorded a larger
cash reduction (KSh 54,000) than actually occurred (KSh
45,000). To correct this book error, KSh 9,000 must be
added back to the cash balance on the books.
• C) Deduct KSh 9,000 from the book balance.
• D) Add KSh 9,000 to the bank balance.
8. A manufacturing corporation calculates its cost of goods
manufactured to be KSh 2,100,000. Its beginning finished
goods inventory was KSh 400,000, and its ending finished