WGU D774 EXAM QUESTIONS AND CORRECT ANSWERS
(VERIFIED) GRADED A+ | WGU D774 OA INTRODUCTION TO
BUSINESS ACCOUNTING | LATEST 2026/2027 UPDATE |
GUARANTEED PASS | D774 OBJECTIVE ASSESSMENT
1. A startup consulting firm receives a $12,000 cash payment from a client for services to be
performed evenly over the next six months. At the time of receipt, the firm credits Unearned
Service Revenue. After three months, what is the remaining balance in Unearned Service
Revenue, and what is the adjusting entry to record the earned portion?
A. Unearned Service Revenue balance is $6,000; debit Unearned Service Revenue $6,000, credit Service
Revenue $6,000.
B. Unearned Service Revenue balance is $6,000; debit Service Revenue $6,000, credit Unearned Service
Revenue $6,000.
C. Unearned Service Revenue balance is $12,000; debit Unearned Service Revenue $12,000, credit Service
Revenue $12,000.
D. Unearned Service Revenue balance is $0; debit Unearned Service Revenue $12,000, credit Service
Revenue $12,000.
Answer: A. Unearned Service Revenue balance is $6,000; debit Unearned Service Revenue
$6,000, credit Service Revenue $6,000.
2. A company uses a perpetual inventory system. It purchases inventory on account for $5,000
with terms 2/10, n/30. The company pays the invoice within the discount period. What is the
correct journal entry to record the payment?
A. Debit Accounts Payable $5,000; credit Cash $5,000.
B. Debit Accounts Payable $5,000; credit Cash $4,900; credit Purchase Discounts $100.
C. Debit Accounts Payable $4,900; credit Cash $4,900.
D. Debit Cash $4,900; debit Purchase Discounts $100; credit Accounts Payable $5,000.
Answer: B. Debit Accounts Payable $5,000; credit Cash $4,900; credit Purchase Discounts
$100.
3. A company has total assets of $500,000, total liabilities of $300,000, and common stock of
$100,000. If the company declares and pays a $20,000 cash dividend, what is the effect on total
stockholders' equity?
A. Stockholders' equity decreases by $20,000.
B. Stockholders' equity decreases by $20,000, but retained earnings decreases by $20,000.
C. Stockholders' equity remains unchanged.
D. Stockholders' equity increases by $20,000.
Answer: B. Stockholders' equity decreases by $20,000, but retained earnings decreases by
$20,000.
4. Which of the following transactions would cause the accounting equation to be out of
balance if recorded as described?
A. Purchasing equipment for cash: debit Equipment, credit Cash.
B. Paying salaries: debit Salaries Expense, credit Cash.
C. Receiving cash from a customer on account: debit Cash, credit Accounts Receivable.
D. Recording depreciation: debit Depreciation Expense, credit Equipment.
, Answer: D. Recording depreciation: debit Depreciation Expense, credit Equipment.
5. A company's adjusted trial balance shows the following balances: Service Revenue $100,000,
Salaries Expense $40,000, Rent Expense $15,000, Depreciation Expense $5,000, and Dividends
$10,000. What is the amount of net income reported on the income statement?
A. Net income is $40,000.
B. Net income is $30,000.
C. Net income is $50,000.
D. Net income is $25,000.
Answer: A. Net income is $40,000.
6. A company has the following adjusted trial balance accounts: Cash $10,000, Accounts
Receivable $20,000, Inventory $30,000, Equipment $50,000, Accumulated Depreciation $10,000,
Accounts Payable $15,000, Salaries Payable $5,000, Common Stock $40,000, Retained Earnings
$20,000, and Dividends $5,000. What is the total amount of current assets?
A. Current assets total $60,000.
B. Current assets total $50,000.
C. Current assets total $70,000.
D. Current assets total $110,000.
Answer: A. Current assets total $60,000.
7. Which of the following statements best describes the accrual basis of accounting?
A. Revenues are recorded when cash is received, and expenses are recorded when cash is paid.
B. Revenues are recorded when earned, and expenses are recorded when incurred, regardless of cash flow.
C. Revenues are recorded when cash is received, and expenses are recorded when incurred.
D. Revenues are recorded when earned, and expenses are recorded when cash is paid.
Answer: B. Revenues are recorded when earned, and expenses are recorded when incurred,
regardless of cash flow.
8. A company purchases a one-year insurance policy for $12,000 on July 1 and records the
entire amount as prepaid insurance. On December 31, what is the correct adjusting entry?
A. Debit Insurance Expense $6,000; credit Prepaid Insurance $6,000.
B. Debit Prepaid Insurance $6,000; credit Insurance Expense $6,000.
C. Debit Insurance Expense $12,000; credit Prepaid Insurance $12,000.
D. Debit Prepaid Insurance $12,000; credit Cash $12,000.
Answer: A. Debit Insurance Expense $6,000; credit Prepaid Insurance $6,000.
9. A company has the following selected account balances before closing entries: Service
Revenue $50,000, Salaries Expense $20,000, Rent Expense $10,000, and Dividends $5,000. What
is the correct closing entry for the revenue account?
A. Debit Income Summary $50,000; credit Service Revenue $50,000.
B. Debit Service Revenue $50,000; credit Income Summary $50,000.
C. Debit Service Revenue $50,000; credit Retained Earnings $50,000.
D. Debit Income Summary $50,000; credit Retained Earnings $50,000.
Answer: B. Debit Service Revenue $50,000; credit Income Summary $50,000.
10. A company's prepaid insurance account has a balance of $12,000 at the beginning of the
(VERIFIED) GRADED A+ | WGU D774 OA INTRODUCTION TO
BUSINESS ACCOUNTING | LATEST 2026/2027 UPDATE |
GUARANTEED PASS | D774 OBJECTIVE ASSESSMENT
1. A startup consulting firm receives a $12,000 cash payment from a client for services to be
performed evenly over the next six months. At the time of receipt, the firm credits Unearned
Service Revenue. After three months, what is the remaining balance in Unearned Service
Revenue, and what is the adjusting entry to record the earned portion?
A. Unearned Service Revenue balance is $6,000; debit Unearned Service Revenue $6,000, credit Service
Revenue $6,000.
B. Unearned Service Revenue balance is $6,000; debit Service Revenue $6,000, credit Unearned Service
Revenue $6,000.
C. Unearned Service Revenue balance is $12,000; debit Unearned Service Revenue $12,000, credit Service
Revenue $12,000.
D. Unearned Service Revenue balance is $0; debit Unearned Service Revenue $12,000, credit Service
Revenue $12,000.
Answer: A. Unearned Service Revenue balance is $6,000; debit Unearned Service Revenue
$6,000, credit Service Revenue $6,000.
2. A company uses a perpetual inventory system. It purchases inventory on account for $5,000
with terms 2/10, n/30. The company pays the invoice within the discount period. What is the
correct journal entry to record the payment?
A. Debit Accounts Payable $5,000; credit Cash $5,000.
B. Debit Accounts Payable $5,000; credit Cash $4,900; credit Purchase Discounts $100.
C. Debit Accounts Payable $4,900; credit Cash $4,900.
D. Debit Cash $4,900; debit Purchase Discounts $100; credit Accounts Payable $5,000.
Answer: B. Debit Accounts Payable $5,000; credit Cash $4,900; credit Purchase Discounts
$100.
3. A company has total assets of $500,000, total liabilities of $300,000, and common stock of
$100,000. If the company declares and pays a $20,000 cash dividend, what is the effect on total
stockholders' equity?
A. Stockholders' equity decreases by $20,000.
B. Stockholders' equity decreases by $20,000, but retained earnings decreases by $20,000.
C. Stockholders' equity remains unchanged.
D. Stockholders' equity increases by $20,000.
Answer: B. Stockholders' equity decreases by $20,000, but retained earnings decreases by
$20,000.
4. Which of the following transactions would cause the accounting equation to be out of
balance if recorded as described?
A. Purchasing equipment for cash: debit Equipment, credit Cash.
B. Paying salaries: debit Salaries Expense, credit Cash.
C. Receiving cash from a customer on account: debit Cash, credit Accounts Receivable.
D. Recording depreciation: debit Depreciation Expense, credit Equipment.
, Answer: D. Recording depreciation: debit Depreciation Expense, credit Equipment.
5. A company's adjusted trial balance shows the following balances: Service Revenue $100,000,
Salaries Expense $40,000, Rent Expense $15,000, Depreciation Expense $5,000, and Dividends
$10,000. What is the amount of net income reported on the income statement?
A. Net income is $40,000.
B. Net income is $30,000.
C. Net income is $50,000.
D. Net income is $25,000.
Answer: A. Net income is $40,000.
6. A company has the following adjusted trial balance accounts: Cash $10,000, Accounts
Receivable $20,000, Inventory $30,000, Equipment $50,000, Accumulated Depreciation $10,000,
Accounts Payable $15,000, Salaries Payable $5,000, Common Stock $40,000, Retained Earnings
$20,000, and Dividends $5,000. What is the total amount of current assets?
A. Current assets total $60,000.
B. Current assets total $50,000.
C. Current assets total $70,000.
D. Current assets total $110,000.
Answer: A. Current assets total $60,000.
7. Which of the following statements best describes the accrual basis of accounting?
A. Revenues are recorded when cash is received, and expenses are recorded when cash is paid.
B. Revenues are recorded when earned, and expenses are recorded when incurred, regardless of cash flow.
C. Revenues are recorded when cash is received, and expenses are recorded when incurred.
D. Revenues are recorded when earned, and expenses are recorded when cash is paid.
Answer: B. Revenues are recorded when earned, and expenses are recorded when incurred,
regardless of cash flow.
8. A company purchases a one-year insurance policy for $12,000 on July 1 and records the
entire amount as prepaid insurance. On December 31, what is the correct adjusting entry?
A. Debit Insurance Expense $6,000; credit Prepaid Insurance $6,000.
B. Debit Prepaid Insurance $6,000; credit Insurance Expense $6,000.
C. Debit Insurance Expense $12,000; credit Prepaid Insurance $12,000.
D. Debit Prepaid Insurance $12,000; credit Cash $12,000.
Answer: A. Debit Insurance Expense $6,000; credit Prepaid Insurance $6,000.
9. A company has the following selected account balances before closing entries: Service
Revenue $50,000, Salaries Expense $20,000, Rent Expense $10,000, and Dividends $5,000. What
is the correct closing entry for the revenue account?
A. Debit Income Summary $50,000; credit Service Revenue $50,000.
B. Debit Service Revenue $50,000; credit Income Summary $50,000.
C. Debit Service Revenue $50,000; credit Retained Earnings $50,000.
D. Debit Income Summary $50,000; credit Retained Earnings $50,000.
Answer: B. Debit Service Revenue $50,000; credit Income Summary $50,000.
10. A company's prepaid insurance account has a balance of $12,000 at the beginning of the
