WGU D104 INTERMEDIATE ACCOUNTING II
ACTUAL OA EXAM PREP MASTER Q&AS
BUNDLE
This premium, comprehensive exam prep bundle delivers verified,
expertly crafted multiple-choice questions matching the rigorous
testing standards of corporate financial reporting and asset
valuation. Each problem includes immediate answer tracking
alongside deep conceptual walkthroughs to clarify difficult
calculations regarding liabilities, leases, equity, and diluted EPS.
Perfect for clearing your university's advanced accounting
benchmarks, this guide guarantees high-impact mastery of
complex financial standards to help you score an effortless A+.
1. Which of the following items is classified as a
current liability on a classified balance sheet?
A. A bond payable maturing in 5 years.
B. A bank note due in 9 months.
C. Stock dividends payable.
D. Deferred tax liabilities.
Answer: B. A bank note due in 9 months.
Rationale: Current liabilities are obligations
whose liquidation is reasonably expected to
require the use of existing current assets or
the creation of other current liabilities within
one year or the operating cycle, whichever is
longer. A note due in 9 months falls within
this window. Bond payables and deferred tax
liabilities are typically long-term, while stock
, dividends payable are classified under
equity.
2. On January 1, a company issues a $100,000, 5-
year, non-interest-bearing note in exchange for
equipment. The prevailing market rate of interest
for a similar note is 8%. How should the note be
recorded initially?
A. At its face value of $100,000.
B. At its present value using the 8% market
interest rate.
C. At its maturity value plus estimated
maintenance costs.
D. At zero value until interest begins to accrue.
Answer: B. At its present value using the 8%
market interest rate.
Rationale: When a note is exchanged for a
non-cash asset and bears no interest or an
unrealistic rate, the note must be recorded at
its present value. This value is computed by
discounting all future cash flows using the
market rate of interest at the date of
issuance.
3. Under GAAP, what is the criteria for a liability to
be classified as a short-term obligation expected
to be refinanced?
, A. The company intends to refinance and has
the demonstrated ability to do so.
B. The company has a verbal agreement with a
lender to extend the maturity.
C. The company has sufficient cash reserves to
pay it off if refinancing fails.
D. The auditor certifies that the market
conditions are stable enough for a rollover.
Answer: A. The company intends to refinance
and has the demonstrated ability to do so.
Rationale: To exclude a short-term obligation
from current liabilities, management must
demonstrate both the clear intent to
refinance on a long-term basis and the
capability to consummate the refinancing
(demonstrated by an actual post-balance-
sheet refinancing or a financing agreement
that meets specific criteria).
4. A company is sued for patent infringement.
Management and legal counsel determine that
an unfavorable outcome is probable and the loss
can be reasonably estimated between $200,000
and $500,000, with no amount within that range
being a better estimate than any other. What
amount should be accrued?
, A. $0, but disclose it in the footnotes.
B. $200,000
C. $350,000
D. $500,000
Answer: B. $200,000
Rationale: Under US GAAP (ASC 450), when
a loss contingency is probable and can only
be estimated within a range, and no single
amount within the range is a better estimate,
the company must accrue the minimum
amount in the range ($200,000) and disclose
the remaining exposure.
5. When a company issues bonds at a premium, it
means that the:
A. Stated interest rate is higher than the market
interest rate.
B. Stated interest rate is lower than the market
interest rate.
C. Bonds are issued at a price below their face
value.
D. Market is demanding a higher yield than the
bond offers.
Answer: A. Stated interest rate is higher than the
market interest rate.
Rationale: Investors are willing to pay more
ACTUAL OA EXAM PREP MASTER Q&AS
BUNDLE
This premium, comprehensive exam prep bundle delivers verified,
expertly crafted multiple-choice questions matching the rigorous
testing standards of corporate financial reporting and asset
valuation. Each problem includes immediate answer tracking
alongside deep conceptual walkthroughs to clarify difficult
calculations regarding liabilities, leases, equity, and diluted EPS.
Perfect for clearing your university's advanced accounting
benchmarks, this guide guarantees high-impact mastery of
complex financial standards to help you score an effortless A+.
1. Which of the following items is classified as a
current liability on a classified balance sheet?
A. A bond payable maturing in 5 years.
B. A bank note due in 9 months.
C. Stock dividends payable.
D. Deferred tax liabilities.
Answer: B. A bank note due in 9 months.
Rationale: Current liabilities are obligations
whose liquidation is reasonably expected to
require the use of existing current assets or
the creation of other current liabilities within
one year or the operating cycle, whichever is
longer. A note due in 9 months falls within
this window. Bond payables and deferred tax
liabilities are typically long-term, while stock
, dividends payable are classified under
equity.
2. On January 1, a company issues a $100,000, 5-
year, non-interest-bearing note in exchange for
equipment. The prevailing market rate of interest
for a similar note is 8%. How should the note be
recorded initially?
A. At its face value of $100,000.
B. At its present value using the 8% market
interest rate.
C. At its maturity value plus estimated
maintenance costs.
D. At zero value until interest begins to accrue.
Answer: B. At its present value using the 8%
market interest rate.
Rationale: When a note is exchanged for a
non-cash asset and bears no interest or an
unrealistic rate, the note must be recorded at
its present value. This value is computed by
discounting all future cash flows using the
market rate of interest at the date of
issuance.
3. Under GAAP, what is the criteria for a liability to
be classified as a short-term obligation expected
to be refinanced?
, A. The company intends to refinance and has
the demonstrated ability to do so.
B. The company has a verbal agreement with a
lender to extend the maturity.
C. The company has sufficient cash reserves to
pay it off if refinancing fails.
D. The auditor certifies that the market
conditions are stable enough for a rollover.
Answer: A. The company intends to refinance
and has the demonstrated ability to do so.
Rationale: To exclude a short-term obligation
from current liabilities, management must
demonstrate both the clear intent to
refinance on a long-term basis and the
capability to consummate the refinancing
(demonstrated by an actual post-balance-
sheet refinancing or a financing agreement
that meets specific criteria).
4. A company is sued for patent infringement.
Management and legal counsel determine that
an unfavorable outcome is probable and the loss
can be reasonably estimated between $200,000
and $500,000, with no amount within that range
being a better estimate than any other. What
amount should be accrued?
, A. $0, but disclose it in the footnotes.
B. $200,000
C. $350,000
D. $500,000
Answer: B. $200,000
Rationale: Under US GAAP (ASC 450), when
a loss contingency is probable and can only
be estimated within a range, and no single
amount within the range is a better estimate,
the company must accrue the minimum
amount in the range ($200,000) and disclose
the remaining exposure.
5. When a company issues bonds at a premium, it
means that the:
A. Stated interest rate is higher than the market
interest rate.
B. Stated interest rate is lower than the market
interest rate.
C. Bonds are issued at a price below their face
value.
D. Market is demanding a higher yield than the
bond offers.
Answer: A. Stated interest rate is higher than the
market interest rate.
Rationale: Investors are willing to pay more
