GU D104 Intermediate Accounting II
W
Pre-Assessment V2 Official Practice Exam
Actual Exam 2026/2027 with Detailed
Rationales | Complete Exam-Style Questions |
Pass Guaranteed – A+ Graded
═════════════════════════════════════
═
SECTION 1: LONG-TERM ASSETS, DEPRECIATION & DEPLETION Q1 – Q10
══════════════════════════════════════
Question 1 of 50
rion Manufacturing begins construction on a new automated production facility. During the
O
current year, Orion incurs average accumulated expenditures of $4,000,000 on the project. The
company has a specific construction loan of $2,500,000 at 8% interest and two general
outstanding loans: a $3,000,000 note at 6% and a $2,000,000 note at 5%. What interest amount
should Orion capitalize to the facility for the current year?
. $284,000 ✓ CORRECT
A
B. $260,000
C. $320,000
D. $224,000
orrect Answer: A
C
Rationale: Under ASC 835, capitalized interest is calculated by applying the specific loan rate to
specific borrowings and the weighted-average rate of general borrowings to remaining
expenditures. Orion capitalizes $200,000 from the specific loan ($2,500,000 × 8%) plus $84,000
from general borrowings ($1,500,000 × 5.6% weighted average), totaling $284,000. The
incorrect option of $320,000 erroneously applies the specific loan rate to the entire $4,000,000
expenditure.
Question 2 of 50
pex Logistics purchases a heavy-duty delivery truck for $120,000 with a salvage value of
A
$10,000 and a useful life of 5 years. If the company uses the double-declining balance method
to calculate depreciation for the second year, what is the depreciation expense recorded?
, . $24,000
A
B. $28,800 ✓ CORRECT
C. $44,000
D. $38,400
orrect Answer: B
C
Rationale: The double-declining balance rate is 40% ( years), applied to the book value at
the beginning of the year without subtracting salvage value initially. First-year depreciation is
$48,000 ($120,000 × 40%), leaving a book value of $72,000, resulting in second-year
depreciation of $28,800 ($72,000 × 40%). A common trap is calculating straight-line
depreciation, which would yield $22,000 [($120,000 - $10,000) / 5], but DDB ignores salvage
value until the final years.
Question 3 of 50
alaxy Corp. owns a piece of manufacturing equipment with a carrying amount of $500,000.
G
Due to a significant drop in industry demand, management evaluates the asset for impairment
and determines the fair value is $420,000 and the estimated future undiscounted cash flows are
$470,000. What loss should Galaxy recognize on the impairment?
. $30,000
A
B. $50,000
C. $0
D. $80,000 ✓ CORRECT
orrect Answer: D
C
Rationale: Under ASC 360, an impairment loss is recognized only when the sum of estimated
undiscounted future cash flows is less than the carrying amount of the asset, which triggers
measurement against fair value. Because the undiscounted cash flows of $470,000 are less
than the $500,000 carrying amount, Galaxy measures the loss as the difference between
carrying amount and fair value, resulting in an $80,000 impairment loss. A tempting mistake is
comparing fair value to undiscounted cash flows, which misapplies the two-step impairment test.
Question 4 of 50
edwood Mining Company acquires a mineral deposit for $8,500,000 and estimates that
R
1,000,000 tons of ore can be extracted. During the first year of operations, Redwood extracts
120,000 tons and sells 80,000 tons. What is the depletion expense recorded for the year?
. $1,020,000
A
B. $850,000
C. $1,360,000
D. $680,000 ✓ CORRECT
, orrect Answer: D
C
Rationale: Depletion expense is calculated based on the units extracted and sold during the
period, not the total amount extracted, because the cost is matched against the revenue
generated. The depletion rate is $8.50 per ton ($8,500,,000,000 tons), and multiplying
this by the 80,000 tons sold yields a depletion expense of $680,000. The trap of $1,020,000
incorrectly expenses the total tons extracted rather than the tons actually sold, violating the
matching principle.
Question 5 of 50
rescent Manufacturing implements a composite depreciation method for its diverse fleet of
C
delivery vehicles. The fleet has a total cost of $1,500,000 and a total salvage value of $150,000,
with an average useful life of 6 years based on the composite depreciation rate. What is the
annual depreciation expense for the fleet?
. $250,000
A
B. $275,000
C. $225,000 ✓ CORRECT
D. $212,500
orrect Answer: C
C
Rationale: The composite depreciation method applies a single weighted-average rate to the
total cost of the asset group, ignoring individual salvage values in the ongoing calculation.
Annual depreciation is calculated as ($1,500,000 total cost - $150,000 total salvage value) / 6
years, resulting in $225,000 of depreciation expense. Choosing $250,000 incorrectly applies the
average life directly to the total cost without deducting salvage value.
Question 6 of 50
elios Construction is building a custom piece of machinery for its own use. During the
H
construction period, Helios incurs direct materials of $40,000, direct labor of $60,000, and
overhead costs specifically identifiable to the project of $15,000. Additionally, Helios allocates
$5,000 of general administrative overhead to the project. What total cost should Helios
capitalize for the machinery?
. $115,000 ✓ CORRECT
A
B. $120,000
C. $100,000
D. $105,000
orrect Answer: A
C
Rationale: Under ASC 360, the capitalized cost of self-constructed assets includes direct
materials, direct labor, and incremental overhead costs directly attributable to the construction
project. Helios capitalizes the $40,000 materials, $60,000 labor, and $15,000 specific overhead,
W
Pre-Assessment V2 Official Practice Exam
Actual Exam 2026/2027 with Detailed
Rationales | Complete Exam-Style Questions |
Pass Guaranteed – A+ Graded
═════════════════════════════════════
═
SECTION 1: LONG-TERM ASSETS, DEPRECIATION & DEPLETION Q1 – Q10
══════════════════════════════════════
Question 1 of 50
rion Manufacturing begins construction on a new automated production facility. During the
O
current year, Orion incurs average accumulated expenditures of $4,000,000 on the project. The
company has a specific construction loan of $2,500,000 at 8% interest and two general
outstanding loans: a $3,000,000 note at 6% and a $2,000,000 note at 5%. What interest amount
should Orion capitalize to the facility for the current year?
. $284,000 ✓ CORRECT
A
B. $260,000
C. $320,000
D. $224,000
orrect Answer: A
C
Rationale: Under ASC 835, capitalized interest is calculated by applying the specific loan rate to
specific borrowings and the weighted-average rate of general borrowings to remaining
expenditures. Orion capitalizes $200,000 from the specific loan ($2,500,000 × 8%) plus $84,000
from general borrowings ($1,500,000 × 5.6% weighted average), totaling $284,000. The
incorrect option of $320,000 erroneously applies the specific loan rate to the entire $4,000,000
expenditure.
Question 2 of 50
pex Logistics purchases a heavy-duty delivery truck for $120,000 with a salvage value of
A
$10,000 and a useful life of 5 years. If the company uses the double-declining balance method
to calculate depreciation for the second year, what is the depreciation expense recorded?
, . $24,000
A
B. $28,800 ✓ CORRECT
C. $44,000
D. $38,400
orrect Answer: B
C
Rationale: The double-declining balance rate is 40% ( years), applied to the book value at
the beginning of the year without subtracting salvage value initially. First-year depreciation is
$48,000 ($120,000 × 40%), leaving a book value of $72,000, resulting in second-year
depreciation of $28,800 ($72,000 × 40%). A common trap is calculating straight-line
depreciation, which would yield $22,000 [($120,000 - $10,000) / 5], but DDB ignores salvage
value until the final years.
Question 3 of 50
alaxy Corp. owns a piece of manufacturing equipment with a carrying amount of $500,000.
G
Due to a significant drop in industry demand, management evaluates the asset for impairment
and determines the fair value is $420,000 and the estimated future undiscounted cash flows are
$470,000. What loss should Galaxy recognize on the impairment?
. $30,000
A
B. $50,000
C. $0
D. $80,000 ✓ CORRECT
orrect Answer: D
C
Rationale: Under ASC 360, an impairment loss is recognized only when the sum of estimated
undiscounted future cash flows is less than the carrying amount of the asset, which triggers
measurement against fair value. Because the undiscounted cash flows of $470,000 are less
than the $500,000 carrying amount, Galaxy measures the loss as the difference between
carrying amount and fair value, resulting in an $80,000 impairment loss. A tempting mistake is
comparing fair value to undiscounted cash flows, which misapplies the two-step impairment test.
Question 4 of 50
edwood Mining Company acquires a mineral deposit for $8,500,000 and estimates that
R
1,000,000 tons of ore can be extracted. During the first year of operations, Redwood extracts
120,000 tons and sells 80,000 tons. What is the depletion expense recorded for the year?
. $1,020,000
A
B. $850,000
C. $1,360,000
D. $680,000 ✓ CORRECT
, orrect Answer: D
C
Rationale: Depletion expense is calculated based on the units extracted and sold during the
period, not the total amount extracted, because the cost is matched against the revenue
generated. The depletion rate is $8.50 per ton ($8,500,,000,000 tons), and multiplying
this by the 80,000 tons sold yields a depletion expense of $680,000. The trap of $1,020,000
incorrectly expenses the total tons extracted rather than the tons actually sold, violating the
matching principle.
Question 5 of 50
rescent Manufacturing implements a composite depreciation method for its diverse fleet of
C
delivery vehicles. The fleet has a total cost of $1,500,000 and a total salvage value of $150,000,
with an average useful life of 6 years based on the composite depreciation rate. What is the
annual depreciation expense for the fleet?
. $250,000
A
B. $275,000
C. $225,000 ✓ CORRECT
D. $212,500
orrect Answer: C
C
Rationale: The composite depreciation method applies a single weighted-average rate to the
total cost of the asset group, ignoring individual salvage values in the ongoing calculation.
Annual depreciation is calculated as ($1,500,000 total cost - $150,000 total salvage value) / 6
years, resulting in $225,000 of depreciation expense. Choosing $250,000 incorrectly applies the
average life directly to the total cost without deducting salvage value.
Question 6 of 50
elios Construction is building a custom piece of machinery for its own use. During the
H
construction period, Helios incurs direct materials of $40,000, direct labor of $60,000, and
overhead costs specifically identifiable to the project of $15,000. Additionally, Helios allocates
$5,000 of general administrative overhead to the project. What total cost should Helios
capitalize for the machinery?
. $115,000 ✓ CORRECT
A
B. $120,000
C. $100,000
D. $105,000
orrect Answer: A
C
Rationale: Under ASC 360, the capitalized cost of self-constructed assets includes direct
materials, direct labor, and incremental overhead costs directly attributable to the construction
project. Helios capitalizes the $40,000 materials, $60,000 labor, and $15,000 specific overhead,
