WGU D104
Intermediate Accounting II
OA2 (Units 4-6)
Actual Questions with Verified Answers
Pass the Exam with Confidence
What You Will Get:
➢60 OA Exam Questions w/ Answers
➢Complete Units 4, 5, and 6
➢Accounting Rule Included
Take and pass the OA :)
, Preview Pages Below
Get the Complete PDF After Purchase
"If you require further clarification or in need of any study resources,
feel free to Message me."
Digital preview sample - complete document available after purchase
,D104 IA 2 OA2 Units 4-6
A company has a policy of calculating depreciation using the nearest fraction of a
year policy. On May 10, the company purchased and placed in service an asset
costing $50,000 with a five-year useful life. The Company uses the straight-line
depreciation method.
What fraction is used to calculate the depreciation expense on December 31 and
what is the depreciation expense on December 31? (round your answer to a
whole number)
$6,392
$6,392 = (7.67/12) x ($50,000/5)
Accounting Rule: the nearest fraction of a year policy states that the depreciation
expense is prorated at the time the asset is placed in service
You need to know the various fractional-year policies (shown in the attached image)
,A company purchases an asset on April 5 of the current year. The company would
like to use the depreciation policy that will result in the highest depreciation
expense in the last year of the asset's useful life.
Which depreciation policy should be used?
a. nearest full month.
b. half-year convention.
c. nearest fraction of the year.
d. full year in period of disposal.
d. full year in period of disposal.
You need to know the various fractional-year policies (shown in the attached image.)
A company owns a machine that it purchased on January 1, year 1 for $600,000.
The machine has an estimated useful life of 5 years and an estimated salvage
value of $75,000. The company uses the sum-of-the-years'-digits method.
What is the depreciation expense for each year and book value of the machine at
the end of year 5?
Year 1: ($600,000 - $75,000) x 5/15 = $175,000
Year 2: ($600,000 - $75,000) x 4/15 = $140,000
Year 3: ($600,000 - $75,000) x 3/15 = $105,000
Year 4: $(600,000 - $75,000) x 2/15 = $70,000
,the asset rather than the passage of time. The amount of depreciation expense is
directly proportional to the amount of the asset’s usage. The activity rate is multiplied by
the depreciable cost (original cost less salvage value). Another formula is: (Actual
Activity in Period/Total Estimate Activity) x (Cost – Salvage Value)
Equipment with a cost of $450,000 has an estimated salvage value of $30,000 and
an estimated life of 4 years or 10,000 hours. It is to be depreciated by the units-of-
activity method.
What is the amount of depreciation for the first full year, during which the
equipment was used 2,700 hours?
$113,400
$113,400 = (2,,000) x ($450,000 – $30,000)
Accounting Rule: (Actual Activity in Period/Total Estimate Activity) x (Cost – Salvage
Value)
A company placed an asset into service on day 1 of year 1 with the following data
related to the purchase:
Cost of machinery $225,000
Estimated salvage value $75,000
Useful life 5 years
What amount of annual depreciation expense should be recorded in the first and
second years using double-declining balance method, and what is the machine's
book value for each of the years?
Year 1:
$90,000 depreciation expense
$135,000 book value
Year 2:
$54,000 depreciation expense
$81,000 book value
,Composite or group depreciation calculates annual depreciation using the straight line
method.
On July 1, 2020, a company purchased a machine with a five-year useful life for
$10,000 and no salvage value. The company prepares accrual-basis financial
statements on a calendar-year basis.
How many months should be included in the calculation of depreciation expense
for the year of acquisition using the double-declining-balance method?
Six
When depreciation is computed for partial periods under a decreasing charge
depreciation method, it is necessary to:
a. charge a full year's depreciation to the year of acquisition.
b. determine depreciation expense for the full year and then prorate the expense
between the two periods involved.
c. use the straight-line method for the year in which the asset is sold or otherwise
disposed of.
d. use a salvage value equal to the first year's partial depreciation charge.
b. determine depreciation expense for the full year and then prorate the expense
between the two periods involved.
Accounting Rule: in computing depreciation expense for partial periods, first determine
the depreciation expense for the full year and then prorate this amount between the two
periods involved.
A lumber retailer recently purchased $500,000 of lumber from a local lumber mill
with terms 2/10, n/30.
How should this transaction be reported on the balance sheet?
a. returnable cash deposits.
b. notes payable.
c. accounts payable.
d. unearned revenue.
c. accounts payable.
,that time. The December 31st, year-end adjusting journal entry is:
a. debit unearned rent for $1,800; credit rent revenue for $1,800.
b. debit unearned rent for $1,350; credit rent revenue for $1,350.
c. debit rent revenue for $900; credit unearned rent for $900.
d. debit cash for $2,700; credit rent revenue for $1,800; credit unearned rent for
$900.
a. debit unearned rent for $1,800; credit rent revenue for $1,800.
The $2,700 was recorded as unearned rent (a current liability). At December 31, 2/3 of
the rent will have been earned (September 1 to December 31). The amount of rent
revenue to be recognized is 2/3 of $2,700 or $1,800.
A retail store operates in a state with a 7% sales tax. The retailer records the sales
tax in the sales revenue account. The amount recorded in the sales revenue
account during May was $754,350.
What is the amount of sales taxes for May?
$49,350
$49,350 = $754,350 – ($754,.07)
A company made cash sales during the month of October of $375,000. The sales
are subject to a 6% sales tax that was also collected. Which of the following
would be included in the journal entry to reflect the sale transactions?
a. debit accounts receivable for $375,000.
b. credit sales taxes payable for $21,226.
c. credit sales revenue for $347,483.
d. credit sales taxes payable for $22,500.
d. credit sales taxes payable for $22,500.
$375,000 x 6%
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?
,A company issues $500,000 of bonds at par.
What is the journal entry to record the bond issuance?
Debit cash 500,000
Credit bonds payable 500,000
A company issues $10,000,000 in 20-year bonds at a 10% interest rate, paid
annually. On the issue date, the bonds sold for $9,900,000.
At which value were the bonds issued?
a. face.
b. maturity.
c. premium.
d. discount.
d. discount.
Accounting Rule: bonds that sell for less than face value, sell at a discount. The stated
interest rate on the bonds is less than the market or effective yield rate. The face value
of the bonds is also called the par value, principal amount, or maturity value.
A company issues bonds at par with a 10-year term for $1,000,000 on January 1 of
year 1. The bonds bear interest at an annual rate of 7% payable semiannually on
January 1 and July 1.
Which journal entry should be recorded on July 1 of year 1?
a. debit interest expense for $70,000; credit interest payable for $70,000.
b. debit interest expense for $70,000; credit cash for $70,000.
c. debit interest expense for $35,000; credit cash for $35,000.
d. debit interest expense for $35,000: credit interest payable for $35,000.
c. debit interest expense for $35,000; credit cash for $35,000.
Accounting Rule: interest paid is calculated by multiplying principal by the stated interest
rate. Since the bonds were issued at par, all the interest paid semi-annually will be
$35,000. When interest is paid, the cash account is credited. When interest accrues, the
interest payable account is credited.
The corporate charter sometimes is known as (a)
a. articles of incorporation.
,debit cash 9,250
credit common stock 5,000
credit additional paid-in capital 4,250
The debit and credit to the cash cancel each other.
Accounting Rule: direct costs incurred to sell stock such as underwriting costs,
accounting and legal fees, and printing costs should be debited to additional paid-in
capital. Management salaries and other indirect costs related to the stock issue should
be expensed as incurred.
A company has acquired 15,000 shares of its treasury stock at $10 per share
using the cost method. The company now decides to sell 2,000 of its treasury
stock for $12 per share. The journal entry to record the sale of treasury stock
includes a debit to cash for $24,000.
What is the correct credit entry?
a. treasury stock for $24,000.
b. treasury stock for $20,000 and gain on sale for $4,000 .
c. treasury stock for $20,000 and retained earnings for $4,000.
d. treasury stock for $20,000 and paid-in capital treasury stock for $4,000.
d. treasury stock for $20,000 and paid-in capital treasury stock for $4,000.
Accounting Rule: if treasury stock is reissued for more than its acquisition cost, the
excess amount is credited to paid-in capital from treasury stock. If treasury stock is
reissued for less than its acquisition cost, the difference should be debited to any paid-in
capital from previous treasury stock transactions. If the balance in this account is
insufficient, the remaining difference is charged to retained earnings.
On year 1, a company issued 10,000 shares of $2 par stock at $12 per share. On
year 3, the company reacquired 1,000 shares of its stock for $15 per share.
How will this transaction in year 3 affect additional paid-in capital, if at all?
a. it will not affect additional paid-in capital.
b. It will increase additional paid-in capital by $15,000.
c. it will decrease additional paid-in capital by $13,000.
d. it will decrease additional paid-in capital by $15,000.
, a. liquidating dividend.
A mining company declared a liquidating dividend. The journal entry to record the
declaration must include a debit to:
a. retained earnings.
b. a paid-in capital account.
c. accumulated depletion.
d. accumulated depreciation.
b. a paid-in capital account.
If a company declares a $100,000 cash dividend, the account to be debited on the
date of declaration is
a. common stock.
b. dividends payable.
c. retained earnings.
d. paid-in capital in excess of par.
c. retained earnings.
For cash dividends, the journal entry on the date of record is
a. non-existent. No journal entry is required on the date of record.
b. debit retained earnings and credit dividends payable.
c. debit dividends payable and credit cash.
d. debit dividends payable and credit retained earnings.
a. non-existent. No journal entry is required on the date of record.
All of the following decreases retained earnings except
a. a property dividend.
b. a stock dividend.
c. a cash dividend.
d. a liquidating dividend.
d. a liquidating dividend.
When a property dividend is declared, the reduction in retained earnings is for
Intermediate Accounting II
OA2 (Units 4-6)
Actual Questions with Verified Answers
Pass the Exam with Confidence
What You Will Get:
➢60 OA Exam Questions w/ Answers
➢Complete Units 4, 5, and 6
➢Accounting Rule Included
Take and pass the OA :)
, Preview Pages Below
Get the Complete PDF After Purchase
"If you require further clarification or in need of any study resources,
feel free to Message me."
Digital preview sample - complete document available after purchase
,D104 IA 2 OA2 Units 4-6
A company has a policy of calculating depreciation using the nearest fraction of a
year policy. On May 10, the company purchased and placed in service an asset
costing $50,000 with a five-year useful life. The Company uses the straight-line
depreciation method.
What fraction is used to calculate the depreciation expense on December 31 and
what is the depreciation expense on December 31? (round your answer to a
whole number)
$6,392
$6,392 = (7.67/12) x ($50,000/5)
Accounting Rule: the nearest fraction of a year policy states that the depreciation
expense is prorated at the time the asset is placed in service
You need to know the various fractional-year policies (shown in the attached image)
,A company purchases an asset on April 5 of the current year. The company would
like to use the depreciation policy that will result in the highest depreciation
expense in the last year of the asset's useful life.
Which depreciation policy should be used?
a. nearest full month.
b. half-year convention.
c. nearest fraction of the year.
d. full year in period of disposal.
d. full year in period of disposal.
You need to know the various fractional-year policies (shown in the attached image.)
A company owns a machine that it purchased on January 1, year 1 for $600,000.
The machine has an estimated useful life of 5 years and an estimated salvage
value of $75,000. The company uses the sum-of-the-years'-digits method.
What is the depreciation expense for each year and book value of the machine at
the end of year 5?
Year 1: ($600,000 - $75,000) x 5/15 = $175,000
Year 2: ($600,000 - $75,000) x 4/15 = $140,000
Year 3: ($600,000 - $75,000) x 3/15 = $105,000
Year 4: $(600,000 - $75,000) x 2/15 = $70,000
,the asset rather than the passage of time. The amount of depreciation expense is
directly proportional to the amount of the asset’s usage. The activity rate is multiplied by
the depreciable cost (original cost less salvage value). Another formula is: (Actual
Activity in Period/Total Estimate Activity) x (Cost – Salvage Value)
Equipment with a cost of $450,000 has an estimated salvage value of $30,000 and
an estimated life of 4 years or 10,000 hours. It is to be depreciated by the units-of-
activity method.
What is the amount of depreciation for the first full year, during which the
equipment was used 2,700 hours?
$113,400
$113,400 = (2,,000) x ($450,000 – $30,000)
Accounting Rule: (Actual Activity in Period/Total Estimate Activity) x (Cost – Salvage
Value)
A company placed an asset into service on day 1 of year 1 with the following data
related to the purchase:
Cost of machinery $225,000
Estimated salvage value $75,000
Useful life 5 years
What amount of annual depreciation expense should be recorded in the first and
second years using double-declining balance method, and what is the machine's
book value for each of the years?
Year 1:
$90,000 depreciation expense
$135,000 book value
Year 2:
$54,000 depreciation expense
$81,000 book value
,Composite or group depreciation calculates annual depreciation using the straight line
method.
On July 1, 2020, a company purchased a machine with a five-year useful life for
$10,000 and no salvage value. The company prepares accrual-basis financial
statements on a calendar-year basis.
How many months should be included in the calculation of depreciation expense
for the year of acquisition using the double-declining-balance method?
Six
When depreciation is computed for partial periods under a decreasing charge
depreciation method, it is necessary to:
a. charge a full year's depreciation to the year of acquisition.
b. determine depreciation expense for the full year and then prorate the expense
between the two periods involved.
c. use the straight-line method for the year in which the asset is sold or otherwise
disposed of.
d. use a salvage value equal to the first year's partial depreciation charge.
b. determine depreciation expense for the full year and then prorate the expense
between the two periods involved.
Accounting Rule: in computing depreciation expense for partial periods, first determine
the depreciation expense for the full year and then prorate this amount between the two
periods involved.
A lumber retailer recently purchased $500,000 of lumber from a local lumber mill
with terms 2/10, n/30.
How should this transaction be reported on the balance sheet?
a. returnable cash deposits.
b. notes payable.
c. accounts payable.
d. unearned revenue.
c. accounts payable.
,that time. The December 31st, year-end adjusting journal entry is:
a. debit unearned rent for $1,800; credit rent revenue for $1,800.
b. debit unearned rent for $1,350; credit rent revenue for $1,350.
c. debit rent revenue for $900; credit unearned rent for $900.
d. debit cash for $2,700; credit rent revenue for $1,800; credit unearned rent for
$900.
a. debit unearned rent for $1,800; credit rent revenue for $1,800.
The $2,700 was recorded as unearned rent (a current liability). At December 31, 2/3 of
the rent will have been earned (September 1 to December 31). The amount of rent
revenue to be recognized is 2/3 of $2,700 or $1,800.
A retail store operates in a state with a 7% sales tax. The retailer records the sales
tax in the sales revenue account. The amount recorded in the sales revenue
account during May was $754,350.
What is the amount of sales taxes for May?
$49,350
$49,350 = $754,350 – ($754,.07)
A company made cash sales during the month of October of $375,000. The sales
are subject to a 6% sales tax that was also collected. Which of the following
would be included in the journal entry to reflect the sale transactions?
a. debit accounts receivable for $375,000.
b. credit sales taxes payable for $21,226.
c. credit sales revenue for $347,483.
d. credit sales taxes payable for $22,500.
d. credit sales taxes payable for $22,500.
$375,000 x 6%
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?
,A company issues $500,000 of bonds at par.
What is the journal entry to record the bond issuance?
Debit cash 500,000
Credit bonds payable 500,000
A company issues $10,000,000 in 20-year bonds at a 10% interest rate, paid
annually. On the issue date, the bonds sold for $9,900,000.
At which value were the bonds issued?
a. face.
b. maturity.
c. premium.
d. discount.
d. discount.
Accounting Rule: bonds that sell for less than face value, sell at a discount. The stated
interest rate on the bonds is less than the market or effective yield rate. The face value
of the bonds is also called the par value, principal amount, or maturity value.
A company issues bonds at par with a 10-year term for $1,000,000 on January 1 of
year 1. The bonds bear interest at an annual rate of 7% payable semiannually on
January 1 and July 1.
Which journal entry should be recorded on July 1 of year 1?
a. debit interest expense for $70,000; credit interest payable for $70,000.
b. debit interest expense for $70,000; credit cash for $70,000.
c. debit interest expense for $35,000; credit cash for $35,000.
d. debit interest expense for $35,000: credit interest payable for $35,000.
c. debit interest expense for $35,000; credit cash for $35,000.
Accounting Rule: interest paid is calculated by multiplying principal by the stated interest
rate. Since the bonds were issued at par, all the interest paid semi-annually will be
$35,000. When interest is paid, the cash account is credited. When interest accrues, the
interest payable account is credited.
The corporate charter sometimes is known as (a)
a. articles of incorporation.
,debit cash 9,250
credit common stock 5,000
credit additional paid-in capital 4,250
The debit and credit to the cash cancel each other.
Accounting Rule: direct costs incurred to sell stock such as underwriting costs,
accounting and legal fees, and printing costs should be debited to additional paid-in
capital. Management salaries and other indirect costs related to the stock issue should
be expensed as incurred.
A company has acquired 15,000 shares of its treasury stock at $10 per share
using the cost method. The company now decides to sell 2,000 of its treasury
stock for $12 per share. The journal entry to record the sale of treasury stock
includes a debit to cash for $24,000.
What is the correct credit entry?
a. treasury stock for $24,000.
b. treasury stock for $20,000 and gain on sale for $4,000 .
c. treasury stock for $20,000 and retained earnings for $4,000.
d. treasury stock for $20,000 and paid-in capital treasury stock for $4,000.
d. treasury stock for $20,000 and paid-in capital treasury stock for $4,000.
Accounting Rule: if treasury stock is reissued for more than its acquisition cost, the
excess amount is credited to paid-in capital from treasury stock. If treasury stock is
reissued for less than its acquisition cost, the difference should be debited to any paid-in
capital from previous treasury stock transactions. If the balance in this account is
insufficient, the remaining difference is charged to retained earnings.
On year 1, a company issued 10,000 shares of $2 par stock at $12 per share. On
year 3, the company reacquired 1,000 shares of its stock for $15 per share.
How will this transaction in year 3 affect additional paid-in capital, if at all?
a. it will not affect additional paid-in capital.
b. It will increase additional paid-in capital by $15,000.
c. it will decrease additional paid-in capital by $13,000.
d. it will decrease additional paid-in capital by $15,000.
, a. liquidating dividend.
A mining company declared a liquidating dividend. The journal entry to record the
declaration must include a debit to:
a. retained earnings.
b. a paid-in capital account.
c. accumulated depletion.
d. accumulated depreciation.
b. a paid-in capital account.
If a company declares a $100,000 cash dividend, the account to be debited on the
date of declaration is
a. common stock.
b. dividends payable.
c. retained earnings.
d. paid-in capital in excess of par.
c. retained earnings.
For cash dividends, the journal entry on the date of record is
a. non-existent. No journal entry is required on the date of record.
b. debit retained earnings and credit dividends payable.
c. debit dividends payable and credit cash.
d. debit dividends payable and credit retained earnings.
a. non-existent. No journal entry is required on the date of record.
All of the following decreases retained earnings except
a. a property dividend.
b. a stock dividend.
c. a cash dividend.
d. a liquidating dividend.
d. a liquidating dividend.
When a property dividend is declared, the reduction in retained earnings is for
