Page 1 of 148
WGU 104 - INTERMEDIATE ACCOUNTING II -
TEST 2 (CHAPTER 16, 17 & 18) | {LATEST 2026/
2027 UPDATE} COMPLETE ACTUAL AND
AUTHENTIC EXAM | BRAND NEW!
Under the equity method, cash dividends received by the investor
from the investee should be treated as ________.
A) an adjustment to other comprehensive income
B) a reduction in the investment account
C) an increase in the investment account
D) dividend income
B) a reduction in the investment account
Leewin Brokerage enters into a lease agreement with Bumble Motors
to lease an automobile with a fair value of $71,000 under a 5-year
lease on December 20, 2018. The lease commences on January 1,
2019, and Leewin will return the automobile to Bumble on December
31, 2023. The automobile has an estimated useful life of 7 years.
Leewin made a lease payment of $10,000 on December 20, 2018. In
addition, the lease agreement stipulates annual payments of $10,000,
due on January 1 of 2019, 2020, 2021, 2022, and 2023. The implicit
rate of the lease is 4% and is known by Leewin. There is no purchase
,Page 2 of 148
option, no lease incentives, no residual value guarantees, and no
transfer of ownership. Leewin incurs initial direct costs of $1,500.
Compute the present value of the lease payments in order to
determine if the lease meets the fourth Group I criterion. Calculate
the present value of each payment individually. Assuming that this is
classified as an operating lease, what is the value of the right-of-use
asset at the lease's commencement?
A) $44,518
B) $46,018
C) $57,799
D) $47,799
C) $57,799
On the statement of cash flows, the total lease payment reduces cash
flow from operating activities for the operating lease. Only the
________ reduces operating cash flows under the ________ lease.
Therefore, cash flows from operating activities are ________ under
the finance lease each year and in total.
A) liability portion; finance; lower
B) interest portion; finance; higher
C) liability portion; operating; lower
D) interest portion; operating; higher
,Page 3 of 148
B) interest portion; finance; higher
Leewin Brokerage enters into a lease agreement with Bumble Motors
to lease an automobile with a fair value of $77,000 under a 5-year
lease on December 20, 2018. The lease commences on January 1,
2019, and Leewin will return the automobile to Bumble on December
31, 2023. The automobile has an estimated useful life of 7 years.
Leewin made a lease payment of $10,900 on December 20, 2018. In
addition, the lease agreement stipulates annual payments of $10,900,
due on January 1 of 2019, 2020, 2021, 2022, and 2023. The implicit
rate of the lease is 6% and is known by Leewin. There is no purchase
option, no lease incentives, no residual value guarantees, and no
transfer of ownership. Leewin incurs initial direct costs of $1,100.
Assuming that this is classified as an operating lease, what is the
annual lease expense reported on the income statement?
A) $10,900
B) $13,300
C) $12,000
D) $11,120
B) $13,300
, Page 4 of 148
Leewin Brokerage enters into a lease agreement with Bumble Motors
to lease an automobile with a fair value of $76,000 under a 5-year
lease on December 20, 2018. The lease commences on January 1,
2019, and Leewin will return the automobile to Bumble on December
31, 2023. The automobile has an estimated useful life of 7 years.
Leewin made a lease payment of $10,000 on December 20, 2018. In
addition, the lease agreement stipulates annual payments of $10,000,
due on January 1 of 2019, 2020, 2021, 2022, and 2023. The implicit
rate of the lease is 6% and is known by Leewin. There is no purchase
option, no lease incentives, no residual value guarantees, and no
transfer of ownership. Leewin incurs initial direct costs of $1,100.
In addition to the information provided above, assume that Bumble
provided a $6,000 incentive. Assuming that this is classified as an
operating lease, what is the annual lease expense reported on the
income statement?
A) $10,000
B) $12,220
C) $11,100
D) $11,020
D) $11,020
Leewin Brokerage enters into a lease agreement with Bumble Motors
to lease an automobile with a fair value of $78,000 under a 5-year
lease on December 20, 2018. The lease commences on January 1,
WGU 104 - INTERMEDIATE ACCOUNTING II -
TEST 2 (CHAPTER 16, 17 & 18) | {LATEST 2026/
2027 UPDATE} COMPLETE ACTUAL AND
AUTHENTIC EXAM | BRAND NEW!
Under the equity method, cash dividends received by the investor
from the investee should be treated as ________.
A) an adjustment to other comprehensive income
B) a reduction in the investment account
C) an increase in the investment account
D) dividend income
B) a reduction in the investment account
Leewin Brokerage enters into a lease agreement with Bumble Motors
to lease an automobile with a fair value of $71,000 under a 5-year
lease on December 20, 2018. The lease commences on January 1,
2019, and Leewin will return the automobile to Bumble on December
31, 2023. The automobile has an estimated useful life of 7 years.
Leewin made a lease payment of $10,000 on December 20, 2018. In
addition, the lease agreement stipulates annual payments of $10,000,
due on January 1 of 2019, 2020, 2021, 2022, and 2023. The implicit
rate of the lease is 4% and is known by Leewin. There is no purchase
,Page 2 of 148
option, no lease incentives, no residual value guarantees, and no
transfer of ownership. Leewin incurs initial direct costs of $1,500.
Compute the present value of the lease payments in order to
determine if the lease meets the fourth Group I criterion. Calculate
the present value of each payment individually. Assuming that this is
classified as an operating lease, what is the value of the right-of-use
asset at the lease's commencement?
A) $44,518
B) $46,018
C) $57,799
D) $47,799
C) $57,799
On the statement of cash flows, the total lease payment reduces cash
flow from operating activities for the operating lease. Only the
________ reduces operating cash flows under the ________ lease.
Therefore, cash flows from operating activities are ________ under
the finance lease each year and in total.
A) liability portion; finance; lower
B) interest portion; finance; higher
C) liability portion; operating; lower
D) interest portion; operating; higher
,Page 3 of 148
B) interest portion; finance; higher
Leewin Brokerage enters into a lease agreement with Bumble Motors
to lease an automobile with a fair value of $77,000 under a 5-year
lease on December 20, 2018. The lease commences on January 1,
2019, and Leewin will return the automobile to Bumble on December
31, 2023. The automobile has an estimated useful life of 7 years.
Leewin made a lease payment of $10,900 on December 20, 2018. In
addition, the lease agreement stipulates annual payments of $10,900,
due on January 1 of 2019, 2020, 2021, 2022, and 2023. The implicit
rate of the lease is 6% and is known by Leewin. There is no purchase
option, no lease incentives, no residual value guarantees, and no
transfer of ownership. Leewin incurs initial direct costs of $1,100.
Assuming that this is classified as an operating lease, what is the
annual lease expense reported on the income statement?
A) $10,900
B) $13,300
C) $12,000
D) $11,120
B) $13,300
, Page 4 of 148
Leewin Brokerage enters into a lease agreement with Bumble Motors
to lease an automobile with a fair value of $76,000 under a 5-year
lease on December 20, 2018. The lease commences on January 1,
2019, and Leewin will return the automobile to Bumble on December
31, 2023. The automobile has an estimated useful life of 7 years.
Leewin made a lease payment of $10,000 on December 20, 2018. In
addition, the lease agreement stipulates annual payments of $10,000,
due on January 1 of 2019, 2020, 2021, 2022, and 2023. The implicit
rate of the lease is 6% and is known by Leewin. There is no purchase
option, no lease incentives, no residual value guarantees, and no
transfer of ownership. Leewin incurs initial direct costs of $1,100.
In addition to the information provided above, assume that Bumble
provided a $6,000 incentive. Assuming that this is classified as an
operating lease, what is the annual lease expense reported on the
income statement?
A) $10,000
B) $12,220
C) $11,100
D) $11,020
D) $11,020
Leewin Brokerage enters into a lease agreement with Bumble Motors
to lease an automobile with a fair value of $78,000 under a 5-year
lease on December 20, 2018. The lease commences on January 1,
