WGU D104 Intermediate Accounting II OBJECTIVE ASSESSMENT ACTUAL EXAM STUDY GUIDE 2025/2026 ACCURATE QUESTIONS AND CORRECT DETAILED ANSWERS WITH RATIONALES || 100% GUARANTEED PASS BRAND NEW VERSION

WGU D104 Intermediate Accounting II OBJECTIVE ASSESSMENT ACTUAL EXAM STUDY GUIDE 2025/2026 ACCURATE QUESTIONS AND CORRECT DETAILED ANSWERS WITH RATIONALES || 100% GUARANTEED PASS BRAND NEW VERSION 1. Asset Turnover Ratio - ANSWER net sales/average total assets 2. Profit Margin Ratio - ANSWER net income/total sales 3. Rate of return on assets - ANSWER net income/average total assets 4. Current ratio - ANSWER current assets/current liabilities 5. Acid-test ratio - ANSWER (cash + short-term investments + net receivables) / current liabilities 6. Rate of return on common stock equity - ANSWER (net income - preferred dividends) / average common stockholders' equity 7. Payout ratio - ANSWER cash dividends / (net income - preferred dividends) 8. Book value per share - ANSWER common stockholders' equity / outstanding shares 9. Sum-of-the-years'-digits method - ANSWER Accelerated depreciation with higher depreciation cost in beginning and lower charges in the end. Numerator is the # of years of est. life remaining at the 1st of the year, denominator is sum of the years individually. (e.g. 5/15, 4/15, 3/15, 2/15, 1/15) 10. Debt to assets ratio - ANSWER total liabilities / total assets 11. Debt equity ratio - ANSWER total liabilities/total equity 12. The preemptive right enables a stockholder to - ANSWER receive the same amount of dividends on a percentage basis as the preferred stockholders. 13. Stockholders' equity is comprised of - ANSWER Capital stock (common and preferred), additional paid in capital, retained earnings, treasury stock as a contra account. 14. Stockholders' equity is generally classified into two major categories - ANSWER earned capital and contributed capital. 15. Stock may be issued in exchange for cash, property or services. How is it recorded? - ANSWER Property or service is recorded at the fair or market value of the stock. If the fair or market value is not available, the fair or market value of the property or services received is used. 16. Journal entry to record the exchange of stock for land if the fair value of the land is unknown - ANSWER Debit land, credit common stock, credit additional paid-in capital (fair value of stock vs par value). 17. Journal entry to record the exchange of stock for land if the fair value of the stock is unknown. - ANSWER Debit land, credit common stock, credit additional paid-in capital (fair value of land vs par value of stock). 18. Journal entry to record the exchange of stock for land if the fair value of stock and land are unknown, but an appraiser values the land. - ANSWER Debit land, credit common stock, credit additional paid in capital. 19. Direct costs incurred to sell stock such as underwriting costs, accounting, and legal fees, and printing cost should be shown as - ANSWER a debit to additional paid in capital. 20. Purchase of treasury stock - ANSWER Debit treasury stock (cost), credit cash. 21. Sale of treasury stock above cost - ANSWER Debit cash, credit treasury stock (cost), credit paid in capital from treasury stock. 22. Sale of treasury stock below cost - ANSWER Debit cash, debit paid in capital from treasury stock (remove any previous credit balance in this account), debit retained earnings (plug figure to balance debit and credit columns), credit treasury stock (cost). 23. Journal entry for dividends at the declaration - ANSWER Debit retained earnings, credit dividends payable. 24. Journal entry for payment of dividends - ANSWER Debit dividends payable, credit cash. 25. Journal entry for a partial return of stockholders' investment - ANSWER At declaration, debit retained earnings, debit paid in capital in excess of par - common stock, credit dividends payable. 26. Which method should be used to handle indirect costs of self-constructed assets? Assigning no variable overhead to a constructed asset Allocating overhead on the basis of gained production Assigning a pro rata portion of all overhead to the asset Allocating the total overhead to the asset - ANSWER Assigning a pro rata portion of all overhead to the asset 27. A company purchases land for development into a subdivision. The land has a factory building on it that will need to be demolished. Where should the interest costs be allocated? Interest expenses General administrative expenses Cost of the land Cost of the plant - ANSWER Cost of land 28. In which situation can capitalization of interest be included in the cost of land? When holding the land as an investment When purchasing land with the intension of developing it for lots sales When selling the land When building a structure on the land - ANSWER When purchasing land with the intension of developing it for lots sales 29. Which value should be used to record machinery that was purchased with a long-term note? Sum of all estimated payments Market price of the machinery Present value of the future payments Appraised value of the machinery - ANSWER Present value of the future payments 30. Which item is considered to be a technology-related intangible asset? Trade secrets Goodwill Artistic-related rights Licensing agreements - ANSWER Trade Secrets 31. Pay out ratio - ANSWER Pay out ratio = cash dividends/net income (less preferred dividends, if applicable) 32. Return on common stockholders' equity - ANSWER Return on Common Stockholders' Equity = (Net Income - Preferred Dividends) / Average Common Stockholders' Equity 33. Book value per share - ANSWER Book Value per Share = common stockholders equity/outstanding shares 34. Dilutive Securities - ANSWER Are securities that can be converted to common stock. Upon conversion or exercise by the holder, the dilutive securities reduce (dilute) earnings per share 35. Antidilutive securities - ANSWER Securities, which upon conversion or exercise, increase earnings per share (or reduce the loss per share). Companies with complex capital structures will not report diluted EPS if the securities in their capital structure are antidilutive; they will report only the basic EPS number. 36. A company using the composite approach to depreciation sells equipment for $10,000. The equipment was purchased five years earlier for $15,000, and the company has already recorded $5,000 in accumulated depreciation. What is included in the journal entry for the sale of the equipment? Debit loss on sale of equipment for $5,000 Credit loss on sale of equipment for $5,000 Debit accumulated depreciation-equipment for $5,000 Credit accumulated depreciation-equipment for $5,000 - ANSWER Debit accumulated depreciation-equipment for $5,000. 37. Several years ago, a company acquired an asset at a cost of $400,000. Last year, the company recognized an impairment loss of $25,000 and properly reduced the asset's book value from $250,000 to $225,000. 38. Using the asset's new base of $225,000, the company calculates depreciation for the current year to be $10,000, bringing the book value down to $215,000. However, the company has also determined that the asset's fair value has recovered and is now estimated to be $260,000. 39. How should the company measure the asset on its current balance sheet? The company should reverse the prior impairment and measure the asset at its current fair value of $260,000. The company should reverse the prior impairment and measure the asset at its fair value prior to the initial impairment of $250,000. The company should not reverse the impairment and should depreciate the asset by $10,000 to a new book value of $215,000. The company sh - ANSWER The company should not reverse the impairment and should depreciate the asset by $10,000 to a new book value of $215,000. 40. Small (Ordinary) Stock Dividends - ANSWER Stock dividends of less than 20-25 percent. 41. Start-up Costs - ANSWER Costs incurred for one-time activities to start a new operation, such as opening a new plant, introducing a new product, or conducting business in a new territory. 42. Stated - ANSWER The interest rate written in the terms of the bond indenture (and ordinarily printed on the bond certificate). 43. Stated Value - ANSWER The amount per share assigned by the board of directors to no-par stock that becomes legal capital per share. 44. Stock Dividend - ANSWER The corporation issues additional stock to its stockholders rather than distributing any assets. 45. Stock Option - ANSWER A warrant that gives selected employees the option to purchase common stock at a given price over an extended period of time. 46. Stock Right - ANSWER Existing stockholders have the right (preemptive privilege) to purchase newly issued shares in proportion to their holdings. 47. Stock Split - ANSWER The corporation will issue additional stock to its stockholders; for example, the terms may indicate a split of 2-for-1 which would indicate that for every one share of stock a shareholder owns, they will receive an additional share of stock. 48. Stock-based Compensation Plans - ANSWER Long-term compensation plans that give employees an equity interest. 49. Stockholders' (Owners') Equity - ANSWER The cumulative net contributions by stockholders (owners) plus recorded earnings that have been retained. 50. Straight-line Method - ANSWER A depreciation method in which periodic depreciation is the same throughout the service life of the asset. 51. Sum-of-the-years'-digits Method - ANSWER A depreciation method that produces decreasing periodic depreciation by applying a decreasing fraction to the depreciable cost of the asset. 52. Term Bonds - ANSWER Bond issues that mature on a single date. 53. Trade Accounts Payable - ANSWER Balances owed to others for goods, supplies, or services purchased on open account. 54. Trade Notes Payable - ANSWER Written promises to pay a certain sum of money on a specified future date and may arise from purchases, financing, or other transactions. 55. Trademark or Trade Name - ANSWER A word, phrase, or symbol that distinguishes or identifies a particular enterprise or product. Registration with the U.S. Patent Office provides legal protection for an indefinite number of renewals for periods of 10 years each. 56. Treasury Stock - ANSWER A corporation's own stock that has been issued, fully paid for, and reacquired by the corporation but not retired. 57. Treasury-stock Method - ANSWER The method that assumes that options or warrants are exercised at the beginning of the year (or date of issue if later), and that the company uses those proceeds to purchase common stock for the treasury. 58. Unearned Revenues - ANSWER Cash received by a company in exchange for future goods or services. 59. Warrants - ANSWER Certificates entitling the holder to acquire shares of stock at a certain price within a stated period. 60. Warranty - ANSWER A promise made by a seller to a buyer to make good on a deficiency of quantity, quality, or performance in a product. 61. Watered Stock - ANSWER The overvaluation of the stockholders' equity resulting from inflated asset values creates this. 62. Weighted-average Accumulated Expenditures - ANSWER Expenditures weighted by the amount of time (fraction of a year or accounting period) in which interest can be incurred on the cost.