WGU D104 INTERMEDIATE ACCOUNTING II
OBJECTIVE ASSESSMENT ACTUAL QUESTIONS
AND CORRECT ANSWERS
◉ Profit Margin Ratio.
Answer: net income/total sales
◉ Rate of return on assets.
Answer: net income/average total assets
◉ Current ratio.
Answer: current assets/current liabilities
◉ acid-test ratio.
Answer: (cash + short-term investments + net receivables) / current
liabilities
◉ rate of return on common stock equity.
Answer: (net income - preferred dividends) / average common
stockholders' equity
◉ payout ratio.
,Answer: cash dividends / (net income - preferred dividends)
◉ book value per share.
Answer: common stockholders' equity / outstanding shares
◉ 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.
OBJECTIVE ASSESSMENT ACTUAL QUESTIONS
AND CORRECT ANSWERS
◉ Profit Margin Ratio.
Answer: net income/total sales
◉ Rate of return on assets.
Answer: net income/average total assets
◉ Current ratio.
Answer: current assets/current liabilities
◉ acid-test ratio.
Answer: (cash + short-term investments + net receivables) / current
liabilities
◉ rate of return on common stock equity.
Answer: (net income - preferred dividends) / average common
stockholders' equity
◉ payout ratio.
,Answer: cash dividends / (net income - preferred dividends)
◉ book value per share.
Answer: common stockholders' equity / outstanding shares
◉ 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.
