WGU D104 INTERMEDIATE ACCOUNTING II
COMPREHENSIVE TEST PAPER QUESTIONS
AND SOLUTIONS
◉ 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)
◉ Variable charge depreciation method (activity method or units-of-
activity/ production approach).
Answer: ((cost - salvage value) X current units) / total estimated
units
◉ activity method.
Answer: (actual activity in period / total estimate activity) X (cost -
salvage value)
◉ double declining balance method.
Answer: An accelerated depreciation method that computes annual
depreciation by multiplying the depreciable asset's decreasing book
,value by a constant percent that is two times the straight-line
depreciation rate.
◉ Multiple assets group depreciation method.
Answer: Assets similar in nature and have approx. same useful lives.
Total of the annual depreciation expense for all assets in the group /
total cost of the assets.
◉ Multiple assets composite depreciation method.
Answer: Assets are dissimilar and have different lives. Total annual
depreciation expense of all assets / total cost of all assets.
◉ Composite life.
Answer: (Original cost - salvage value) / total annual depreciation
◉ Composite depreciation rate.
Answer: Total annual depreciation of all assets / total cost of all
assets.
◉ Journal entry for gain on sale of composite depreciation
equipment.
Answer: Debit cash & accumulated depreciation (subtract gain),
credit equipment.
, ◉ Impairment.
Answer: If the carrying amount exceeds the undiscounted future
cash flows. Loss = carrying amount > fair value.
◉ Journal entry for impairment.
Answer: Debit impairment loss, credit accumulated depreciation
◉ When is the restoration of an impairment loss permitted?.
Answer: When an assets is held for disposal. Impairment loss is
reported at the lower of cost or net realizable value (fair value - cost
to sell/dispose) not to exceed amount of initial impairment loss.
◉ Depletion base for natural resources.
Answer: (cost to acquire + cost to explore + cost to develop i.e.
intangible costs + cost to restore). Tangible costs to extract
resources depreciated separately.
◉ Natural resources depletion rate.
Answer: (depletion base - salvage value) / total units to be
recovered.
◉ Natural resources depletion expense.
Answer: (depletion rate X units of usage) / extracted
COMPREHENSIVE TEST PAPER QUESTIONS
AND SOLUTIONS
◉ 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)
◉ Variable charge depreciation method (activity method or units-of-
activity/ production approach).
Answer: ((cost - salvage value) X current units) / total estimated
units
◉ activity method.
Answer: (actual activity in period / total estimate activity) X (cost -
salvage value)
◉ double declining balance method.
Answer: An accelerated depreciation method that computes annual
depreciation by multiplying the depreciable asset's decreasing book
,value by a constant percent that is two times the straight-line
depreciation rate.
◉ Multiple assets group depreciation method.
Answer: Assets similar in nature and have approx. same useful lives.
Total of the annual depreciation expense for all assets in the group /
total cost of the assets.
◉ Multiple assets composite depreciation method.
Answer: Assets are dissimilar and have different lives. Total annual
depreciation expense of all assets / total cost of all assets.
◉ Composite life.
Answer: (Original cost - salvage value) / total annual depreciation
◉ Composite depreciation rate.
Answer: Total annual depreciation of all assets / total cost of all
assets.
◉ Journal entry for gain on sale of composite depreciation
equipment.
Answer: Debit cash & accumulated depreciation (subtract gain),
credit equipment.
, ◉ Impairment.
Answer: If the carrying amount exceeds the undiscounted future
cash flows. Loss = carrying amount > fair value.
◉ Journal entry for impairment.
Answer: Debit impairment loss, credit accumulated depreciation
◉ When is the restoration of an impairment loss permitted?.
Answer: When an assets is held for disposal. Impairment loss is
reported at the lower of cost or net realizable value (fair value - cost
to sell/dispose) not to exceed amount of initial impairment loss.
◉ Depletion base for natural resources.
Answer: (cost to acquire + cost to explore + cost to develop i.e.
intangible costs + cost to restore). Tangible costs to extract
resources depreciated separately.
◉ Natural resources depletion rate.
Answer: (depletion base - salvage value) / total units to be
recovered.
◉ Natural resources depletion expense.
Answer: (depletion rate X units of usage) / extracted
