WGU D774 – INTRODUCTION TO BUSINESS
ACCOUNTING (OA & PA) Actual Exam | Official
Exam – Complete Q&A with Rationales – Pass
Guaranteed - A+ Graded
TABLE OF CONTENTS
Section 1 | Accounting Cycle & Financial Statements | Q1 – Q10
Section 2 | Journal Entries, Ledgers & Trial Balance | Q11 – Q20
Section 3 | Revenue, Expense Recognition & Adjusting Entries | Q21 – Q30
Section 4 | Inventory, Cost of Goods Sold & Internal Controls | Q31 – Q40
Section 5 | Cash, Receivables, Payables & Financial Analysis | Q41 – Q50
Instructions: Choose the single best answer. Pass: 40 in 90 minutes.
══════════════════════════════════════
SECTION 1: ACCOUNTING CYCLE & FINANCIAL STATEMENTS Q1 – Q10
══════════════════════════════════════
Question 1 of 50
A bookkeeper for a small landscaping company has just finished analyzing source
documents and journalizing all December transactions. Before preparing any
statements, what is the next step in the accounting cycle?
A. Prepare the post-closing trial balance
B. Post the entries to the general ledger ✓ CORRECT
C. Prepare the financial statements
D. Record the period-end adjusting entries
Correct Answer: B
Rationale: The accounting cycle follows a specific sequence where journalized
transactions must be posted to ledger accounts before any trial balance or adjustment
work can occur. Preparing statements or adjusting entries before posting would be
,impossible because ledger balances would not yet exist. In practice, accounting
software automates posting, but understanding the sequence remains essential for
error tracing.
Question 2 of 50
A retail store manager is reviewing the year-end balance sheet with the staff
accountant. The store currently holds $32,000 of merchandise purchased for resale.
Where should this inventory be classified?
A. Long-term investments
B. Property, plant, and equipment
C. Current assets ✓ CORRECT
D. Intangible assets
Correct Answer: C
Rationale: Inventory is classified as a current asset because it is expected to be sold,
consumed, or converted to cash within one year or the operating cycle. Property, plant,
and equipment represents long-lived productive assets, while long-term investments
and intangibles serve different business purposes. On a classified balance sheet,
current assets are listed in order of liquidity, with inventory typically appearing after
receivables.
Question 3 of 50
A consulting firm ended the fiscal year with revenues of $420,000 and total expenses of
$315,000. The firm declared no dividends during the year. How does this result affect
retained earnings?
A. Retained earnings increases by $105,000 ✓ CORRECT
B. Retained earnings decreases by $105,000
C. Retained earnings remains unchanged
D. Retained earnings increases by $420,000
, Correct Answer: A
Rationale: Net income of $105,000 closes into retained earnings, increasing equity;
revenues alone do not determine the effect because expenses must be matched
against them. A decrease would only occur with a net loss or dividend declaration. The
statement of retained earnings explicitly shows this flow from the income statement
into the equity section of the balance sheet.
Question 4 of 50
A manufacturing company purchased new production machinery for $250,000 cash
during the year. The controller is preparing the statement of cash flows. Where should
this outflow be reported?
A. Operating activities
B. Financing activities
C. Noncash investing and financing activities
D. Investing activities ✓ CORRECT
Correct Answer: D
Rationale: Purchases of long-term productive assets such as machinery are investing
activities because they represent capital expenditures rather than day-to-day operations
or capital structure changes. Operating activities involve current assets and liabilities
related to income generation, while financing activities involve debt and equity
transactions. Even though the machinery supports operations, the cash outflow is
classified by the nature of the asset acquired.
Question 5 of 50
A startup software company borrows $50,000 from a bank on a 3-year note payable.
The owner asks what happens to the accounting equation immediately after receiving
the cash. What is the correct effect?
ACCOUNTING (OA & PA) Actual Exam | Official
Exam – Complete Q&A with Rationales – Pass
Guaranteed - A+ Graded
TABLE OF CONTENTS
Section 1 | Accounting Cycle & Financial Statements | Q1 – Q10
Section 2 | Journal Entries, Ledgers & Trial Balance | Q11 – Q20
Section 3 | Revenue, Expense Recognition & Adjusting Entries | Q21 – Q30
Section 4 | Inventory, Cost of Goods Sold & Internal Controls | Q31 – Q40
Section 5 | Cash, Receivables, Payables & Financial Analysis | Q41 – Q50
Instructions: Choose the single best answer. Pass: 40 in 90 minutes.
══════════════════════════════════════
SECTION 1: ACCOUNTING CYCLE & FINANCIAL STATEMENTS Q1 – Q10
══════════════════════════════════════
Question 1 of 50
A bookkeeper for a small landscaping company has just finished analyzing source
documents and journalizing all December transactions. Before preparing any
statements, what is the next step in the accounting cycle?
A. Prepare the post-closing trial balance
B. Post the entries to the general ledger ✓ CORRECT
C. Prepare the financial statements
D. Record the period-end adjusting entries
Correct Answer: B
Rationale: The accounting cycle follows a specific sequence where journalized
transactions must be posted to ledger accounts before any trial balance or adjustment
work can occur. Preparing statements or adjusting entries before posting would be
,impossible because ledger balances would not yet exist. In practice, accounting
software automates posting, but understanding the sequence remains essential for
error tracing.
Question 2 of 50
A retail store manager is reviewing the year-end balance sheet with the staff
accountant. The store currently holds $32,000 of merchandise purchased for resale.
Where should this inventory be classified?
A. Long-term investments
B. Property, plant, and equipment
C. Current assets ✓ CORRECT
D. Intangible assets
Correct Answer: C
Rationale: Inventory is classified as a current asset because it is expected to be sold,
consumed, or converted to cash within one year or the operating cycle. Property, plant,
and equipment represents long-lived productive assets, while long-term investments
and intangibles serve different business purposes. On a classified balance sheet,
current assets are listed in order of liquidity, with inventory typically appearing after
receivables.
Question 3 of 50
A consulting firm ended the fiscal year with revenues of $420,000 and total expenses of
$315,000. The firm declared no dividends during the year. How does this result affect
retained earnings?
A. Retained earnings increases by $105,000 ✓ CORRECT
B. Retained earnings decreases by $105,000
C. Retained earnings remains unchanged
D. Retained earnings increases by $420,000
, Correct Answer: A
Rationale: Net income of $105,000 closes into retained earnings, increasing equity;
revenues alone do not determine the effect because expenses must be matched
against them. A decrease would only occur with a net loss or dividend declaration. The
statement of retained earnings explicitly shows this flow from the income statement
into the equity section of the balance sheet.
Question 4 of 50
A manufacturing company purchased new production machinery for $250,000 cash
during the year. The controller is preparing the statement of cash flows. Where should
this outflow be reported?
A. Operating activities
B. Financing activities
C. Noncash investing and financing activities
D. Investing activities ✓ CORRECT
Correct Answer: D
Rationale: Purchases of long-term productive assets such as machinery are investing
activities because they represent capital expenditures rather than day-to-day operations
or capital structure changes. Operating activities involve current assets and liabilities
related to income generation, while financing activities involve debt and equity
transactions. Even though the machinery supports operations, the cash outflow is
classified by the nature of the asset acquired.
Question 5 of 50
A startup software company borrows $50,000 from a bank on a 3-year note payable.
The owner asks what happens to the accounting equation immediately after receiving
the cash. What is the correct effect?
