WGU D196 ACCOUNTING | QUESTIONS
AND ANSWERS | LATEST UPDATE
1.
A company pays $18,000 on January 1 for a 12-month insurance policy. What adjusting entry
is required on March 31?
A. Debit Insurance Expense $18,000; Credit Prepaid Insurance $18,000
B. Debit Prepaid Insurance $4,500; Credit Insurance Expense $4,500
C. Debit Insurance Expense $4,500; Credit Prepaid Insurance $4,500
D. Debit Cash $4,500; Credit Insurance Expense $4,500
Correct Answer: C
Rationale:
The policy covers 12 months, so monthly insurance expense is:
18,000÷12=1,50018,000 \div 12 = 1,50018,000÷12=1,500
For 3 months:
1,500×3=4,5001,500 \times 3 = 4,5001,500×3=4,500
The adjustment recognizes expired coverage: debit Insurance Expense, credit Prepaid
Insurance.
2.
A business receives $24,000 cash in advance for services to be provided evenly over 8 months.
After 3 months, how much should remain in Unearned Revenue?
A. $9,000
B. $12,000
C. $15,000
D. $24,000
Correct Answer: C
Rationale:
Monthly revenue earned:
,24,000÷8=3,00024,000 \div 8 = 3,00024,000÷8=3,000
After 3 months, earned revenue:
3,000×3=9,0003,000 \times 3 = 9,0003,000×3=9,000
Remaining unearned revenue:
24,000−9,000=15,00024,000 - 9,000 = 15,00024,000−9,000=15,000
3.
Which transaction increases total assets and total liabilities at the same time?
A. Paying accounts payable with cash
B. Purchasing supplies on account
C. Receiving cash from a customer for a prior account receivable
D. Declaring dividends
Correct Answer: B
Rationale:
Purchasing supplies on account increases Supplies (asset) and Accounts Payable (liability).
4.
At the end of the year, salaries of $6,800 have been incurred but not yet paid or recorded. What
adjusting entry is required?
A. Debit Salaries Payable $6,800; Credit Salaries Expense $6,800
B. Debit Salaries Expense $6,800; Credit Salaries Payable $6,800
C. Debit Cash $6,800; Credit Salaries Expense $6,800
D. Debit Accounts Payable $6,800; Credit Salaries Expense $6,800
Correct Answer: B
Rationale:
Accrued expenses are recognized when incurred, even if unpaid. The company records the
expense and the liability.
5.
,Which financial statement reports revenues and expenses for a period of time?
A. Balance sheet
B. Statement of retained earnings only
C. Income statement
D. Statement of cash flows only
Correct Answer: C
Rationale:
The income statement reports revenues, expenses, and net income for a period.
6.
A company has beginning retained earnings of $52,000, net income of $18,500, and dividends of
$7,000. Ending retained earnings equals:
A. $45,000
B. $59,500
C. $63,500
D. $77,500
Correct Answer: C
Rationale:
52,000+18,500−7,000=63,50052,000 + 18,500 - 7,000 = 63,50052,000+18,500−7,000=63,500
7.
Which of the following is a deferral rather than an accrual?
A. Interest earned but not yet received
B. Salaries incurred but unpaid
C. Prepaid rent not yet expired
D. Utilities used but not yet billed
Correct Answer: C
Rationale:
A deferral involves cash paid or received before recognition of expense or revenue. Prepaid rent
is a deferred expense.
, 8.
A company purchased equipment for $96,000 with an expected useful life of 8 years and no
salvage value. Using straight-line depreciation, annual depreciation expense is:
A. $8,000
B. $10,000
C. $12,000
D. $14,000
Correct Answer: C
Rationale:
96,000÷8=12,00096,000 \div 8 = 12,00096,000÷8=12,000
9.
If total liabilities are $148,000 and stockholders’ equity is $212,000, total assets must equal:
A. $64,000
B. $148,000
C. $212,000
D. $360,000
Correct Answer: D
Rationale:
Using the accounting equation:
Assets=Liabilities+Equity=148,000+212,000=360,000Assets = Liabilities + Equity = 148,000 +
212,000 = 360,000Assets=Liabilities+Equity=148,000+212,000=360,000
10.
Which of the following would be classified as a contra asset account?
A. Accounts Payable
B. Service Revenue
C. Accumulated Depreciation
D. Unearned Revenue
Correct Answer: C
AND ANSWERS | LATEST UPDATE
1.
A company pays $18,000 on January 1 for a 12-month insurance policy. What adjusting entry
is required on March 31?
A. Debit Insurance Expense $18,000; Credit Prepaid Insurance $18,000
B. Debit Prepaid Insurance $4,500; Credit Insurance Expense $4,500
C. Debit Insurance Expense $4,500; Credit Prepaid Insurance $4,500
D. Debit Cash $4,500; Credit Insurance Expense $4,500
Correct Answer: C
Rationale:
The policy covers 12 months, so monthly insurance expense is:
18,000÷12=1,50018,000 \div 12 = 1,50018,000÷12=1,500
For 3 months:
1,500×3=4,5001,500 \times 3 = 4,5001,500×3=4,500
The adjustment recognizes expired coverage: debit Insurance Expense, credit Prepaid
Insurance.
2.
A business receives $24,000 cash in advance for services to be provided evenly over 8 months.
After 3 months, how much should remain in Unearned Revenue?
A. $9,000
B. $12,000
C. $15,000
D. $24,000
Correct Answer: C
Rationale:
Monthly revenue earned:
,24,000÷8=3,00024,000 \div 8 = 3,00024,000÷8=3,000
After 3 months, earned revenue:
3,000×3=9,0003,000 \times 3 = 9,0003,000×3=9,000
Remaining unearned revenue:
24,000−9,000=15,00024,000 - 9,000 = 15,00024,000−9,000=15,000
3.
Which transaction increases total assets and total liabilities at the same time?
A. Paying accounts payable with cash
B. Purchasing supplies on account
C. Receiving cash from a customer for a prior account receivable
D. Declaring dividends
Correct Answer: B
Rationale:
Purchasing supplies on account increases Supplies (asset) and Accounts Payable (liability).
4.
At the end of the year, salaries of $6,800 have been incurred but not yet paid or recorded. What
adjusting entry is required?
A. Debit Salaries Payable $6,800; Credit Salaries Expense $6,800
B. Debit Salaries Expense $6,800; Credit Salaries Payable $6,800
C. Debit Cash $6,800; Credit Salaries Expense $6,800
D. Debit Accounts Payable $6,800; Credit Salaries Expense $6,800
Correct Answer: B
Rationale:
Accrued expenses are recognized when incurred, even if unpaid. The company records the
expense and the liability.
5.
,Which financial statement reports revenues and expenses for a period of time?
A. Balance sheet
B. Statement of retained earnings only
C. Income statement
D. Statement of cash flows only
Correct Answer: C
Rationale:
The income statement reports revenues, expenses, and net income for a period.
6.
A company has beginning retained earnings of $52,000, net income of $18,500, and dividends of
$7,000. Ending retained earnings equals:
A. $45,000
B. $59,500
C. $63,500
D. $77,500
Correct Answer: C
Rationale:
52,000+18,500−7,000=63,50052,000 + 18,500 - 7,000 = 63,50052,000+18,500−7,000=63,500
7.
Which of the following is a deferral rather than an accrual?
A. Interest earned but not yet received
B. Salaries incurred but unpaid
C. Prepaid rent not yet expired
D. Utilities used but not yet billed
Correct Answer: C
Rationale:
A deferral involves cash paid or received before recognition of expense or revenue. Prepaid rent
is a deferred expense.
, 8.
A company purchased equipment for $96,000 with an expected useful life of 8 years and no
salvage value. Using straight-line depreciation, annual depreciation expense is:
A. $8,000
B. $10,000
C. $12,000
D. $14,000
Correct Answer: C
Rationale:
96,000÷8=12,00096,000 \div 8 = 12,00096,000÷8=12,000
9.
If total liabilities are $148,000 and stockholders’ equity is $212,000, total assets must equal:
A. $64,000
B. $148,000
C. $212,000
D. $360,000
Correct Answer: D
Rationale:
Using the accounting equation:
Assets=Liabilities+Equity=148,000+212,000=360,000Assets = Liabilities + Equity = 148,000 +
212,000 = 360,000Assets=Liabilities+Equity=148,000+212,000=360,000
10.
Which of the following would be classified as a contra asset account?
A. Accounts Payable
B. Service Revenue
C. Accumulated Depreciation
D. Unearned Revenue
Correct Answer: C
