,WGU D104 OA 2 Intermediate Accounting II 2026/2027 Questions
And Answers
Q1. What is the primary purpose of depreciation accounting?
A) Determine the current fair value of a plant asset
B) Accumulate cash for replacement of the asset
C) Allocate the depreciable cost of an asset systematically over periods
benefiting from its use
D) Record decreases in market value
Correct Answer: C) Allocate the depreciable cost of an asset systematically
over periods benefiting from its use
Rationale: Depreciation is a cost-allocation process. It systematically
assigns an asset's depreciable amount to expense over its useful life rather
than attempting to measure market value.
Q2. How is the depreciable base of an asset normally calculated?
A) Fair value − accumulated depreciation
B) Cost + residual value
C) Cost − accumulated depreciation
D) Cost − estimated residual value
Correct Answer: D) Cost − estimated residual value
Rationale: The depreciable base represents the portion of an asset's cost
expected to be consumed during its useful life.
Q3. Which formula represents annual straight-line depreciation?
A) Cost × useful life
B) Carrying amount × accelerated rate
C) Cost ÷ residual value
D) (Cost − residual value) ÷ useful life
Correct Answer: D) (Cost − residual value) ÷ useful life
Rationale: Straight-line depreciation allocates the depreciable base equally
over the asset's estimated useful life.
Q4. Equipment costs $120,000, has an estimated residual value of
$20,000, and a five-year useful life. What is annual straight-line
depreciation?
,A) $24,000
B) $20,000
C) $28,000
D) $16,000
Correct Answer: B) $20,000
Rationale: The depreciable base is $100,000. Dividing $100,000 by five
years produces annual depreciation of $20,000.
Q5. Which depreciation method allocates cost based directly on
actual usage or production?
A) Straight-line method
B) Units-of-activity method
C) Double-declining-balance method
D) Sum-of-the-years'-digits method
Correct Answer: B) Units-of-activity method
Rationale: The units-of-activity method bases depreciation on actual output,
hours, miles, or another measure of asset usage.
Q6. A machine costs $110,000, has a $10,000 residual value, and is
expected to produce 50,000 units. It produces 8,000 units this year.
What is depreciation expense?
A) $16,000
B) $8,000
C) $17,600
D) $20,000
Correct Answer: A) $16,000
Rationale: Depreciation per unit is $100,000 ÷ 50,000 = $2. Multiplying $2
by 8,000 units gives $16,000.
Q7. What is the denominator used under sum-of-the-years'-digits
depreciation for an asset with a five-year useful life?
A) 5
B) 10
C) 15
D) 25
Correct Answer: C) 15
, Rationale: The denominator equals 5 + 4 + 3 + 2 + 1 = 15.
Q8. An asset costs $105,000, has a $5,000 residual value, and a five-
year useful life. What is first-year depreciation using sum-of-the-
years'-digits?
A) Approximately $33,333
B) $20,000
C) $40,000
D) Approximately $26,667
Correct Answer: A) Approximately $33,333
Rationale: The depreciable base is $100,000. First-year depreciation is
$100,000 × 5/15 = approximately $33,333.
Q9. What double-declining-balance rate is used for an asset with a
five-year useful life?
A) 20%
B) 25%
C) 40%
D) 50%
Correct Answer: C) 40%
Rationale: Straight-line depreciation is 20% per year for a five-year asset.
Double-declining balance doubles that rate to 40%.
Q10. An asset costs $100,000 and has a five-year life. What is first-
year depreciation using double-declining balance?
A) $20,000
B) $40,000
C) $30,000
D) $50,000
Correct Answer: B) $40,000
Rationale: The 40% double-declining rate is applied to the $100,000
beginning carrying amount.
Q11. How is residual value treated in the double-declining-balance
calculation?
A) It is not subtracted before applying the rate, but depreciation should not
reduce the asset below its residual value.
And Answers
Q1. What is the primary purpose of depreciation accounting?
A) Determine the current fair value of a plant asset
B) Accumulate cash for replacement of the asset
C) Allocate the depreciable cost of an asset systematically over periods
benefiting from its use
D) Record decreases in market value
Correct Answer: C) Allocate the depreciable cost of an asset systematically
over periods benefiting from its use
Rationale: Depreciation is a cost-allocation process. It systematically
assigns an asset's depreciable amount to expense over its useful life rather
than attempting to measure market value.
Q2. How is the depreciable base of an asset normally calculated?
A) Fair value − accumulated depreciation
B) Cost + residual value
C) Cost − accumulated depreciation
D) Cost − estimated residual value
Correct Answer: D) Cost − estimated residual value
Rationale: The depreciable base represents the portion of an asset's cost
expected to be consumed during its useful life.
Q3. Which formula represents annual straight-line depreciation?
A) Cost × useful life
B) Carrying amount × accelerated rate
C) Cost ÷ residual value
D) (Cost − residual value) ÷ useful life
Correct Answer: D) (Cost − residual value) ÷ useful life
Rationale: Straight-line depreciation allocates the depreciable base equally
over the asset's estimated useful life.
Q4. Equipment costs $120,000, has an estimated residual value of
$20,000, and a five-year useful life. What is annual straight-line
depreciation?
,A) $24,000
B) $20,000
C) $28,000
D) $16,000
Correct Answer: B) $20,000
Rationale: The depreciable base is $100,000. Dividing $100,000 by five
years produces annual depreciation of $20,000.
Q5. Which depreciation method allocates cost based directly on
actual usage or production?
A) Straight-line method
B) Units-of-activity method
C) Double-declining-balance method
D) Sum-of-the-years'-digits method
Correct Answer: B) Units-of-activity method
Rationale: The units-of-activity method bases depreciation on actual output,
hours, miles, or another measure of asset usage.
Q6. A machine costs $110,000, has a $10,000 residual value, and is
expected to produce 50,000 units. It produces 8,000 units this year.
What is depreciation expense?
A) $16,000
B) $8,000
C) $17,600
D) $20,000
Correct Answer: A) $16,000
Rationale: Depreciation per unit is $100,000 ÷ 50,000 = $2. Multiplying $2
by 8,000 units gives $16,000.
Q7. What is the denominator used under sum-of-the-years'-digits
depreciation for an asset with a five-year useful life?
A) 5
B) 10
C) 15
D) 25
Correct Answer: C) 15
, Rationale: The denominator equals 5 + 4 + 3 + 2 + 1 = 15.
Q8. An asset costs $105,000, has a $5,000 residual value, and a five-
year useful life. What is first-year depreciation using sum-of-the-
years'-digits?
A) Approximately $33,333
B) $20,000
C) $40,000
D) Approximately $26,667
Correct Answer: A) Approximately $33,333
Rationale: The depreciable base is $100,000. First-year depreciation is
$100,000 × 5/15 = approximately $33,333.
Q9. What double-declining-balance rate is used for an asset with a
five-year useful life?
A) 20%
B) 25%
C) 40%
D) 50%
Correct Answer: C) 40%
Rationale: Straight-line depreciation is 20% per year for a five-year asset.
Double-declining balance doubles that rate to 40%.
Q10. An asset costs $100,000 and has a five-year life. What is first-
year depreciation using double-declining balance?
A) $20,000
B) $40,000
C) $30,000
D) $50,000
Correct Answer: B) $40,000
Rationale: The 40% double-declining rate is applied to the $100,000
beginning carrying amount.
Q11. How is residual value treated in the double-declining-balance
calculation?
A) It is not subtracted before applying the rate, but depreciation should not
reduce the asset below its residual value.
