Wgu D744 Intro to Business Accounting
[ACTUAL EXAM] LATEST VERSION
[QUESTIONS AND ANSWERS] WITH
PRACTICE EXAM DETAILED AND
VERIFIED FOR GUARANTEED PASS-
LATEST UPDATE 2025 GRADED A.
**1. A company purchases office supplies for $500 on account. How
does this transaction affect the accounting equation?**
- A) Assets increase; Liabilities increase
- B) Assets increase; Owner's Equity increases
- C) Assets decrease; Liabilities decrease
- D) No effect on the accounting equation
**Rationale:** Purchasing supplies (an asset) "on account" means you
haven't paid cash yet, so you owe money (a liability). This increases
both Assets (Supplies) and Liabilities (Accounts Payable) by $500.
**2. Which of the following best describes the purpose of the Income
Statement?**
- A) To report the financial position of a company on a specific date
- B) To report the revenues and expenses for a specific period
- C) To report changes in cash over a period of time
, - D) To report the owners' claims against the assets
**Rationale:** The Income Statement, also known as the Profit & Loss
(P&L) statement, measures performance over a period of time (e.g., a
month or year) by subtracting expenses from revenues. The Balance
Sheet reports the financial position on a *specific date* (Option A).
**3. If a company has Current Assets of $50,000 and Current Liabilities
of $25,000, what is the Current Ratio, and what does it indicate?**
- A) 0.5; The company has low liquidity
- B) 2.0; The company has a strong ability to pay short-term obligations
- C) 2.0; The company is over-leveraged
- D) 0.5; The company has high profitability
**Rationale:** The current ratio is calculated as Current Assets /
Current Liabilities ($50,000 / $25,000 = 2.0). A ratio of 2.0 generally
indicates that the company has twice as many current assets as current
liabilities, suggesting good short-term liquidity (ability to pay bills due
within a year).
**4. In a perpetual inventory system, recording a sale on account
includes which two journal entries?**
- A) Debit Cash; Credit Sales Revenue
- B) Debit Accounts Receivable and Cost of Goods Sold; Credit Sales
Revenue and Inventory
[ACTUAL EXAM] LATEST VERSION
[QUESTIONS AND ANSWERS] WITH
PRACTICE EXAM DETAILED AND
VERIFIED FOR GUARANTEED PASS-
LATEST UPDATE 2025 GRADED A.
**1. A company purchases office supplies for $500 on account. How
does this transaction affect the accounting equation?**
- A) Assets increase; Liabilities increase
- B) Assets increase; Owner's Equity increases
- C) Assets decrease; Liabilities decrease
- D) No effect on the accounting equation
**Rationale:** Purchasing supplies (an asset) "on account" means you
haven't paid cash yet, so you owe money (a liability). This increases
both Assets (Supplies) and Liabilities (Accounts Payable) by $500.
**2. Which of the following best describes the purpose of the Income
Statement?**
- A) To report the financial position of a company on a specific date
- B) To report the revenues and expenses for a specific period
- C) To report changes in cash over a period of time
, - D) To report the owners' claims against the assets
**Rationale:** The Income Statement, also known as the Profit & Loss
(P&L) statement, measures performance over a period of time (e.g., a
month or year) by subtracting expenses from revenues. The Balance
Sheet reports the financial position on a *specific date* (Option A).
**3. If a company has Current Assets of $50,000 and Current Liabilities
of $25,000, what is the Current Ratio, and what does it indicate?**
- A) 0.5; The company has low liquidity
- B) 2.0; The company has a strong ability to pay short-term obligations
- C) 2.0; The company is over-leveraged
- D) 0.5; The company has high profitability
**Rationale:** The current ratio is calculated as Current Assets /
Current Liabilities ($50,000 / $25,000 = 2.0). A ratio of 2.0 generally
indicates that the company has twice as many current assets as current
liabilities, suggesting good short-term liquidity (ability to pay bills due
within a year).
**4. In a perpetual inventory system, recording a sale on account
includes which two journal entries?**
- A) Debit Cash; Credit Sales Revenue
- B) Debit Accounts Receivable and Cost of Goods Sold; Credit Sales
Revenue and Inventory
