WGU D104 Unit 2 Intermediate Accounting II Practice Exam 118
Questions and Answers 2026/2027
1. If the purchase price of the land is $50,000 cash but Home Depot assumes
accrued property taxes of $5,000 and liens of $10,000, its land cost is what?
________________________________________________________________________________
2. A company has a construction note of 750,000 with an interest rate of 15%, a
5 year note of 550,000 with an interest rate of 10%, and a 10 year bond of
600,000 with an interest rate of 12%. What is the total actual interest?
________________________________________________________________________________
3. One of the approaches to account for the interest incurred in financing the
construction of PPE is charge construction with all costs of funds employed,
whether what?
________________________________________________________________________________
4. What is the cost of property acquired by the issuance of securities, which are
actively traded on an organized exchange, equal to?
________________________________________________________________________________
5. To apply the avoidable interest concept, a company determines the potential
amount of interest that it may capitalize during an accounting period by
multiplying the interest rate by the what for qualifying assets during the period?
________________________________________________________________________________
6. Why do companies capitalize any addition to plant assets?
________________________________________________________________________________
7. Most companies use ____ as the basis for valuing PPE.
________________________________________________________________________________
8. A long-lived asset classified as held for sale should be measured at the lower
of its carrying amount or fair value less what?
________________________________________________________________________________
9. Involuntary conversion intended or not intended by the owner?
________________________________________________________________________________
10. GAAP requires you capitalize only the what incurred during construction?
________________________________________________________________________________
D104 Unit 2 • 1
,11. You capitalize the lesser of avoidable interest or what?
________________________________________________________________________________
12. The weighted average interest rate is calculated by dividing total interest by
what?
________________________________________________________________________________
13. Should expenditures that simply maintain a given level of services be
expensed or capitalized?
________________________________________________________________________________
14. Avoidable interest is the amount of interest cost during the period that a
company could theoretically avoid if it had not made what?
________________________________________________________________________________
15. Should interest costs still be capitalized even if excess funds are being
reinvested in interest bearing securities?
________________________________________________________________________________
16. Wilson Co. purchased land as a factory site for $1,350,000. Wilson paid
$120,000 to tear down two buildings on the land. Salvage was sold for $8,100.
Legal fees of $5,220 were paid for title investigation and making the purchase.
Architect's fees were $46,800. Title insurance cost $3,600, and liability
insurance during construction cost $3,900. Excavation cost $15,660. The
contractor was paid $4,200,000. An assessment made by the city for pavement
was $9,600. At what cost should Wilson Co record the land?
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
17. If excess weighted average accumulated expenditures is $70,000 and the
weighted average interest rate is 11.04%, how much interest is avoidable?
________________________________________________________________________________
18. If a company purchases land with the intent of developing it for a particular
use, do the interest costs qualify for capitalization?
________________________________________________________________________________
D104 Unit 2 • 2
, 19. Historical cost is the value of an asset measured by the cash or cash
equivalent price of obtaining the asset and bringing it to the location and
condition necessary for what?
________________________________________________________________________________
20. Companies should not write up PPE to reflect fair value when it is above
cost because companies should not anticipate gains and losses but should
recognize gains and losses only when the asset is what?
________________________________________________________________________________
21. When Walmart or Home Depot purchases land on which to build a new
store, does it include any additional land improvements that have an indefinite
life?
________________________________________________________________________________
22. How are fences and parking lots reported on the balance sheet?
________________________________________________________________________________
23. PPE are assets that are acquired for use in operations and not for what?
________________________________________________________________________________
24. How are expenditures that extend the useful life of a plant asset without
improving its quantity or quality accounted for?
________________________________________________________________________________
25. In accounting for plant assets, what outlay, made subsequent to acquisition,
should be fully expensed in the period the expenditure is made?
________________________________________________________________________________
26. Does the cost of equipment include freight and handling charges incurred?
________________________________________________________________________________
27. When Walmart or Home Depot purchases land on which to build a new
store, does it include the cost of the title?
________________________________________________________________________________
28. Assume a 17-month bridge construction project with current-year
payments to the contractor of $240,000 on March 1, $480,000 on July 1, and
$360,000 on November 1. What is the total weighted average accumulated
expenditure?
________________________________________________________________________________
D104 Unit 2 • 3
Questions and Answers 2026/2027
1. If the purchase price of the land is $50,000 cash but Home Depot assumes
accrued property taxes of $5,000 and liens of $10,000, its land cost is what?
________________________________________________________________________________
2. A company has a construction note of 750,000 with an interest rate of 15%, a
5 year note of 550,000 with an interest rate of 10%, and a 10 year bond of
600,000 with an interest rate of 12%. What is the total actual interest?
________________________________________________________________________________
3. One of the approaches to account for the interest incurred in financing the
construction of PPE is charge construction with all costs of funds employed,
whether what?
________________________________________________________________________________
4. What is the cost of property acquired by the issuance of securities, which are
actively traded on an organized exchange, equal to?
________________________________________________________________________________
5. To apply the avoidable interest concept, a company determines the potential
amount of interest that it may capitalize during an accounting period by
multiplying the interest rate by the what for qualifying assets during the period?
________________________________________________________________________________
6. Why do companies capitalize any addition to plant assets?
________________________________________________________________________________
7. Most companies use ____ as the basis for valuing PPE.
________________________________________________________________________________
8. A long-lived asset classified as held for sale should be measured at the lower
of its carrying amount or fair value less what?
________________________________________________________________________________
9. Involuntary conversion intended or not intended by the owner?
________________________________________________________________________________
10. GAAP requires you capitalize only the what incurred during construction?
________________________________________________________________________________
D104 Unit 2 • 1
,11. You capitalize the lesser of avoidable interest or what?
________________________________________________________________________________
12. The weighted average interest rate is calculated by dividing total interest by
what?
________________________________________________________________________________
13. Should expenditures that simply maintain a given level of services be
expensed or capitalized?
________________________________________________________________________________
14. Avoidable interest is the amount of interest cost during the period that a
company could theoretically avoid if it had not made what?
________________________________________________________________________________
15. Should interest costs still be capitalized even if excess funds are being
reinvested in interest bearing securities?
________________________________________________________________________________
16. Wilson Co. purchased land as a factory site for $1,350,000. Wilson paid
$120,000 to tear down two buildings on the land. Salvage was sold for $8,100.
Legal fees of $5,220 were paid for title investigation and making the purchase.
Architect's fees were $46,800. Title insurance cost $3,600, and liability
insurance during construction cost $3,900. Excavation cost $15,660. The
contractor was paid $4,200,000. An assessment made by the city for pavement
was $9,600. At what cost should Wilson Co record the land?
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
17. If excess weighted average accumulated expenditures is $70,000 and the
weighted average interest rate is 11.04%, how much interest is avoidable?
________________________________________________________________________________
18. If a company purchases land with the intent of developing it for a particular
use, do the interest costs qualify for capitalization?
________________________________________________________________________________
D104 Unit 2 • 2
, 19. Historical cost is the value of an asset measured by the cash or cash
equivalent price of obtaining the asset and bringing it to the location and
condition necessary for what?
________________________________________________________________________________
20. Companies should not write up PPE to reflect fair value when it is above
cost because companies should not anticipate gains and losses but should
recognize gains and losses only when the asset is what?
________________________________________________________________________________
21. When Walmart or Home Depot purchases land on which to build a new
store, does it include any additional land improvements that have an indefinite
life?
________________________________________________________________________________
22. How are fences and parking lots reported on the balance sheet?
________________________________________________________________________________
23. PPE are assets that are acquired for use in operations and not for what?
________________________________________________________________________________
24. How are expenditures that extend the useful life of a plant asset without
improving its quantity or quality accounted for?
________________________________________________________________________________
25. In accounting for plant assets, what outlay, made subsequent to acquisition,
should be fully expensed in the period the expenditure is made?
________________________________________________________________________________
26. Does the cost of equipment include freight and handling charges incurred?
________________________________________________________________________________
27. When Walmart or Home Depot purchases land on which to build a new
store, does it include the cost of the title?
________________________________________________________________________________
28. Assume a 17-month bridge construction project with current-year
payments to the contractor of $240,000 on March 1, $480,000 on July 1, and
$360,000 on November 1. What is the total weighted average accumulated
expenditure?
________________________________________________________________________________
D104 Unit 2 • 3
