WGU D104 Objective Assessment V2 – Intermediate Accounting II Review (Latest 2026/ 2027 Update) 100% Verified Questions & Answers | Grade A

WGU D104 Objective Assessment V2 – Intermediate Accounting II Review (Latest 2026/ 2027 Update) 100% Verified Questions & Answers | Grade A QUESTION A company's normal operating cycle is one year, and they have the following account balances taken from the trial balance: •Accounts payable: $50,000 •Accounts receivable: $25,000 •Notes payable (due in 30 months): $15,000 •Customer advances: $10,000 •Bonds payable (due in 60 months): $30,000 •Sales tax payable: $5,000 Which amount should be included as current liabilities on the balance sheet? Answer: c. $65,000 ($50,000 + $10,000 + $5,000) QUESTION On March 1, 2020, a company borrows money from its bank. The company signs a $100,000, 6%, four-month note. The company has a calendar year end and prepares financial statements annually. What is the journal entry the company records when it borrows the money on March 1, 2020? Answer: Debit Cash 100,000 Credit Notes payable 100,000 QUESTION What is the journal entry to record payment of the note at maturity? Answer: Debit Notes payable 100,000 Debit Interest expense 2,0001 Credit Cash 102,000 1($100,000 x 6%) x 4/12 QUESTION A fast food restaurant sells frosty milk shakes for $2.00. The restaurant also sells gift certificate booklets containing 10 frosty milk shake certificates for $20 a booklet. On May 1st, a customer buys a booklet. On June 1st, a customer redeems four certificates for four frosty milk shakes. What is the entry to record the sale of the gift certificate booklet and redemption of 4 gift certificates? Answer: 5/1 Debit Cash 20 Credit Unearned gift card revenue 20 6/1 Debit Unearned gift card revenue 8 Credit Sales revenue 8 QUESTION On January 1, a company received $24,000 in advance for monthly janitorial services for the year. Which journal entry should the company use to record the month of May's revenue? Answer: a. Debit unearned sales revenue for $2,000; Credit sales revenue for $2,000. QUESTION A company collected sales tax of $2,800 on sales of $35,000. The sales tax rate is 8.5%. What is the journal entry to record the sale if the company segregates the sales tax from the sale? Answer: Debit Cash 37,800 Debit Loss on sales tax collection 175 Credit Sales revenue 35,000 Credit Sales tax payable 2,975 QUESTION What is the journal entry to record subsequent payment to the sales tax agency? Answer: Debit Sales tax payable 2,975 Credit Cash 2,975 QUESTION What is the journal entry to record the sale if the company does not segregate the sales tax from the sale? Answer: Debit Cash 37,800 Credit Sales revenue 37,800 QUESTION What is the journal entry to record payment to the sales tax agency? Answer: Debit Sales revenue 2,800 Debit Loss on sales tax collection 175 Credit Cash 2,975 QUESTION A company does not segregate sales tax and the amount of sale at the time of sale. At quarter end, the company must record the sales tax. The sales revenue account shows a balance of $200,000, which includes 6% sales tax. Which journal entry should be used to record the amount due to the taxing unit? Answer: b. Debit sales revenue for $11,321; Credit sales taxes payable for $11,321. QUESTION On February 1, a company borrowed $24,600 from its bank. The terms of the loan require five equal annual principal payments beginning January 31 of the following year. The company has a year-end calendar. Which journal entry should the company use to record the loan? Answer: a. Debit cash $24,600, Credit current maturities of long-term debt $4,920, Credit note payable $19,680. QUESTION A company should accrue a loss contingency only if the likelihood that a liability has been incurred is Answer: d. probable and the amount of the loss can be reasonably estimated. QUESTION A company issued a product recall due to an apparently preexisting and material defect discovered after the end of its fiscal year. Financial statements have not yet been issued. The action required of the company for this reasonably estimable contingency for the year just ended is Answer: c. to accrue the liability and explain it in a note to the financial statements. QUESTION A company has been sued by a group of investors, and legal counsel believes it is probable that the company will lose the lawsuit. The company and its legal counsel believe the amount of the potential loss will be between $300,000 and $900,000. What is the proper presentation and disclosure treatment for this lawsuit? Answer: c. record a $300,000 loss contingency and related liability. The company will disclose the nature of the contingency and an estimate of the possible range of loss. QUESTION A contingent loss should be reported in a disclosure note to the financial statements rather than being accrued if Answer: b. the incurrence of a loss is reasonably possible. QUESTION A customer of a company alleges that the company's new razor sharpener had a defect that resulted in serious injury to the customer. The company believes the customer has a 71% chance of winning the case, and that if the customer wins the case, there is a range of losses of between $1,000,000 and $3,000,000 in which any number is equally likely to occur. The company should accrue a liability in the amount of Answer: b. $1,000,000 QUESTION A company is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. The company's lawyer states that it is probable that the company will lose the suit and be found liable for a judgment costing the company anywhere from $1,800,000 to $9,000,000. However, the lawyer states that the most probable cost is $5,400,000. As a result of the above facts, the company should accrue Answer: b. a loss contingency of $5,400,000 and disclose an additional contingency of up to $3,600,000. QUESTION Which of the following is a contingency that is accrued? Answer: c. the company offers a two-year warranty, and the expenses can be reasonably estimated. QUESTION Company A filed suit against Company B in 2018 seeking damages for patent infringement. On December 31, 2018, legal counsel for Company A believed that it was probable that Company A would be successful against Company B for an estimated amount in the range of $30 million to $60 million, with each amount in that range considered equally likely. Company A was awarded $40 million in April 2019. Company A should report this award in its 2018 financial statements, issued in March 2019 as Answer: d. a disclosure of a gain contingency of an undetermined amount in the range of $30 million to $60 million. QUESTION When a material gain contingency is probable and the amount of gain can be reasonably estimated, the gain should be Answer: c. disclosed but not recognized in the income statement. QUESTION A computer store sells 100 tables at $300 per unit which each have a one-year warranty from the date of purchase. During the first year, the store incurs $500 of warranty expense related to these sales. The store reasonably estimates based upon past experience that it will incur a total of $2,000 of warranty costs related to these sales during the one-year warranty period. What journal entries should the store make to account for the warranty liability expense and liability and these costs incurred during the first year? Answer: Year 1 Debit Warranty Expense 2,000 Credit Warranty Liability 2,000 To accrue the estimated warranty expense and liability. Debit Warranty liability 500 Credit Cash, inventory, accrued payroll 500