WGU D102 Financial Accounting|PA and
OA|Explore New 165 Actual Questions and
Answers|100% Correct|2026 Update
1. A company purchases equipment for $50,000 cash.
What is the effect on the accounting equation?
A) Assets increase; liabilities increase
B) Assets increase; equity increases
C) No net change to total assets
D) Assets decrease; liabilities decrease
Answer: C
Rationale: Cash (asset) decreases $50,000; Equipment
(asset) increases $50,000. Total assets unchanged.
2. A company borrows $100,000 from a bank. What is
the effect?
A) Assets increase; liabilities increase
B) Assets increase; equity increases
1
,C) Assets decrease; liabilities decrease
D) No effect
Answer: A
Rationale: Cash (asset) increases; Notes Payable (liability)
increases.
3. A company issues common stock for $20,000 cash.
Effect on accounting equation?
A) Assets increase; liabilities increase
B) Assets increase; equity increase
C) Liabilities increase; equity decrease
D) No effect
Answer: B
Rationale: Cash increases; Common Stock (equity)
increases.
4. A company pays $5,000 to a supplier for inventory
purchased on account. Effect?
2
,A) Assets decrease; liabilities decrease
B) Assets decrease; equity decrease
C) Assets increase; liabilities increase
D) No net change
Answer: A
Rationale: Cash decreases; Accounts Payable decreases.
5. A company provides services for $3,000 cash. Effect?
A) Assets increase; liabilities increase
B) Assets increase; equity increase (revenue)
C) No effect
D) Assets decrease; equity decrease
Answer: B
Rationale: Cash increases; Service Revenue increases
equity.
6. A company pays $1,200 for a 12-month insurance
policy in advance. Effect?
3
, A) Assets decrease; equity decrease
B) No net change to total assets
C) Liabilities increase; equity decrease
D) Assets increase; liabilities increase
Answer: B
Rationale: Prepaid Insurance (asset) increases $1,200;
Cash decreases $1,200.
7. A company declares and pays a $10,000 dividend.
Effect?
A) Assets decrease; equity decrease
B) Assets increase; equity increase
C) Liabilities increase; equity decrease
D) No effect
Answer: A
Rationale: Cash decreases; Retained Earnings (equity)
decreases.
4
OA|Explore New 165 Actual Questions and
Answers|100% Correct|2026 Update
1. A company purchases equipment for $50,000 cash.
What is the effect on the accounting equation?
A) Assets increase; liabilities increase
B) Assets increase; equity increases
C) No net change to total assets
D) Assets decrease; liabilities decrease
Answer: C
Rationale: Cash (asset) decreases $50,000; Equipment
(asset) increases $50,000. Total assets unchanged.
2. A company borrows $100,000 from a bank. What is
the effect?
A) Assets increase; liabilities increase
B) Assets increase; equity increases
1
,C) Assets decrease; liabilities decrease
D) No effect
Answer: A
Rationale: Cash (asset) increases; Notes Payable (liability)
increases.
3. A company issues common stock for $20,000 cash.
Effect on accounting equation?
A) Assets increase; liabilities increase
B) Assets increase; equity increase
C) Liabilities increase; equity decrease
D) No effect
Answer: B
Rationale: Cash increases; Common Stock (equity)
increases.
4. A company pays $5,000 to a supplier for inventory
purchased on account. Effect?
2
,A) Assets decrease; liabilities decrease
B) Assets decrease; equity decrease
C) Assets increase; liabilities increase
D) No net change
Answer: A
Rationale: Cash decreases; Accounts Payable decreases.
5. A company provides services for $3,000 cash. Effect?
A) Assets increase; liabilities increase
B) Assets increase; equity increase (revenue)
C) No effect
D) Assets decrease; equity decrease
Answer: B
Rationale: Cash increases; Service Revenue increases
equity.
6. A company pays $1,200 for a 12-month insurance
policy in advance. Effect?
3
, A) Assets decrease; equity decrease
B) No net change to total assets
C) Liabilities increase; equity decrease
D) Assets increase; liabilities increase
Answer: B
Rationale: Prepaid Insurance (asset) increases $1,200;
Cash decreases $1,200.
7. A company declares and pays a $10,000 dividend.
Effect?
A) Assets decrease; equity decrease
B) Assets increase; equity increase
C) Liabilities increase; equity decrease
D) No effect
Answer: A
Rationale: Cash decreases; Retained Earnings (equity)
decreases.
4
