WGU D105 OA2 COMPREHENSIVE QUIZ
(UNITS 5–9) QUESTIONS AND ANSWERS
1. Under GAAP, a loss contingency must be accrued if which two conditions are met?
A. Possible and estimable
B. Probable and estimable
C. Reasonably possible and calculable
D. Certain and significant
Answer: B
Conceptual Explanation: To accrue a loss contingency, the event must be probable (likely
to occur) and the amount must be reasonably estimable.
2. Which of the following is considered a current liability?
A. Preferred stock dividends in arrears
B. The portion of long-term debt maturing within one year
C. Bonds payable maturing in 5 years
D. Deferred tax assets
Answer: B
,Conceptual Explanation: The current portion of long-term debt represents an obligation
due within the next 12 months, making it a current liability.
3. A company sells a product with a 2-year warranty. When should the warranty expense be
recognized?
A. When the repair is actually performed
B. When the warranty period expires
C. In the period the product is sold
D. Only when the customer makes a claim
Answer: C
Conceptual Explanation: Under the expense warranty approach, estimated warranty
costs are matched against revenue in the period of sale.
4. Which tax is typically withheld from an employee’s paycheck and also paid as a matching
contribution by the employer?
A. Federal income tax
B. Federal unemployment tax (FUTA)
C. FICA (Social Security and Medicare)
D. State income tax
Answer: C
, Conceptual Explanation: FICA taxes are paid by both the employer and the employee,
whereas FUTA is paid only by the employer.
5. A gift card is sold for $100. How should the company record the initial transaction?
A. Debit Cash, Credit Sales Revenue
B. Debit Accounts Receivable, Credit Sales Revenue
C. Debit Cash, Credit Unearned Revenue
D. Debit Inventory, Credit Cash
Answer: C
Conceptual Explanation: Revenue is not earned until the gift card is redeemed or expires;
thus, it is initially recorded as a liability (Unearned Revenue).
6. When the market rate of interest is higher than the stated (coupon) rate, a bond will be
issued at:
A. A premium
B. Face value
C. A discount
D. Zero interest
Answer: C
Conceptual Explanation: If the stated rate is lower than what the market demands, the
bond price must drop below face value to attract investors.
(UNITS 5–9) QUESTIONS AND ANSWERS
1. Under GAAP, a loss contingency must be accrued if which two conditions are met?
A. Possible and estimable
B. Probable and estimable
C. Reasonably possible and calculable
D. Certain and significant
Answer: B
Conceptual Explanation: To accrue a loss contingency, the event must be probable (likely
to occur) and the amount must be reasonably estimable.
2. Which of the following is considered a current liability?
A. Preferred stock dividends in arrears
B. The portion of long-term debt maturing within one year
C. Bonds payable maturing in 5 years
D. Deferred tax assets
Answer: B
,Conceptual Explanation: The current portion of long-term debt represents an obligation
due within the next 12 months, making it a current liability.
3. A company sells a product with a 2-year warranty. When should the warranty expense be
recognized?
A. When the repair is actually performed
B. When the warranty period expires
C. In the period the product is sold
D. Only when the customer makes a claim
Answer: C
Conceptual Explanation: Under the expense warranty approach, estimated warranty
costs are matched against revenue in the period of sale.
4. Which tax is typically withheld from an employee’s paycheck and also paid as a matching
contribution by the employer?
A. Federal income tax
B. Federal unemployment tax (FUTA)
C. FICA (Social Security and Medicare)
D. State income tax
Answer: C
, Conceptual Explanation: FICA taxes are paid by both the employer and the employee,
whereas FUTA is paid only by the employer.
5. A gift card is sold for $100. How should the company record the initial transaction?
A. Debit Cash, Credit Sales Revenue
B. Debit Accounts Receivable, Credit Sales Revenue
C. Debit Cash, Credit Unearned Revenue
D. Debit Inventory, Credit Cash
Answer: C
Conceptual Explanation: Revenue is not earned until the gift card is redeemed or expires;
thus, it is initially recorded as a liability (Unearned Revenue).
6. When the market rate of interest is higher than the stated (coupon) rate, a bond will be
issued at:
A. A premium
B. Face value
C. A discount
D. Zero interest
Answer: C
Conceptual Explanation: If the stated rate is lower than what the market demands, the
bond price must drop below face value to attract investors.
