WGU D104 Intermediate Accounting II | 100 Original Practice
Questions with Answers and Rationales 2026/2026
1. A liability is generally current when expected to be settled within which
period?
A. Ten years
B. One year or the operating cycle, whichever is longer
C. Five years
D. Any period management chooses
Answer: B. One year or the operating cycle, whichever is longer
Rationale: Current classification follows the operating cycle or one year criterion.
2. A company buys $18,000 of inventory on credit. What account is credited?
A. Sales
B. Accounts payable
C. Retained earnings
D. Inventory
Answer: B. Accounts payable
Rationale: Credit purchases create a supplier liability.
3. A $60,000 note bears 6% annual interest. What is interest for three
months?
A. $300
B. $900
C. $1,800
D. $3,600
Answer: B. $900
Rationale: Interest equals $60,000 × 6% × 3/12 = $900.
4. Accrued interest at year end requires which entry?
A. Debit interest expense and credit interest payable
B. Debit cash and credit revenue
C. Debit debt and credit equity
D. No entry until paid
Answer: A. Debit interest expense and credit interest payable
Rationale: The entry recognizes incurred interest and the unpaid obligation.
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,5. A retailer collects $10,000 sales revenue plus $600 sales tax. What is the
$600?
A. Revenue
B. A sales tax liability
C. Inventory
D. Equity
Answer: B. A sales tax liability
Rationale: The retailer collects the tax for the taxing authority.
6. Customer advances before performance are generally recorded as what?
A. Contract liabilities
B. Bad debt expense
C. Treasury stock
D. Gains
Answer: A. Contract liabilities
Rationale: The company owes goods or services to the customer.
7. A company initially records $24,000 deferred subscription revenue. After
earning one fourth, what liability remains?
A. $6,000
B. $12,000
C. $18,000
D. $24,000
Answer: C. $18,000
Rationale: Revenue earned is $6,000, leaving $18,000 unearned.
8. Employee payroll deductions withheld but not remitted are generally
what?
A. Employer revenue
B. Liabilities
C. Assets
D. Dividends
Answer: B. Liabilities
Rationale: The employer owes those amounts to the designated recipients.
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, 9. Compensated absences are generally accrued when attributable to past
service, vesting or accumulating, probable, and what?
A. Impossible to estimate
B. Reasonably estimable
C. Paid only in stock
D. Unrelated to employees
Answer: B. Reasonably estimable
Rationale: Reasonable measurement is one of the accrual conditions.
10. A probable and reasonably estimable litigation loss generally requires
what?
A. Accrual
B. Revenue recognition
C. No disclosure
D. An asset
Answer: A. Accrual
Rationale: Both the loss and liability are recognized.
11. A material litigation loss is reasonably possible but not probable. What is
generally appropriate?
A. Accrue the maximum
B. Disclose without accruing
C. Recognize a gain
D. Ignore it
Answer: B. Disclose without accruing
Rationale: Reasonably possible losses generally require note disclosure.
12. A loss contingency is remote. Absent special disclosure requirements,
what is generally appropriate?
A. Accrue the maximum
B. Neither accrue nor disclose
C. Recognize revenue
D. Increase inventory
Answer: B. Neither accrue nor disclose
Rationale: Remote losses generally do not require recognition or disclosure.
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Questions with Answers and Rationales 2026/2026
1. A liability is generally current when expected to be settled within which
period?
A. Ten years
B. One year or the operating cycle, whichever is longer
C. Five years
D. Any period management chooses
Answer: B. One year or the operating cycle, whichever is longer
Rationale: Current classification follows the operating cycle or one year criterion.
2. A company buys $18,000 of inventory on credit. What account is credited?
A. Sales
B. Accounts payable
C. Retained earnings
D. Inventory
Answer: B. Accounts payable
Rationale: Credit purchases create a supplier liability.
3. A $60,000 note bears 6% annual interest. What is interest for three
months?
A. $300
B. $900
C. $1,800
D. $3,600
Answer: B. $900
Rationale: Interest equals $60,000 × 6% × 3/12 = $900.
4. Accrued interest at year end requires which entry?
A. Debit interest expense and credit interest payable
B. Debit cash and credit revenue
C. Debit debt and credit equity
D. No entry until paid
Answer: A. Debit interest expense and credit interest payable
Rationale: The entry recognizes incurred interest and the unpaid obligation.
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,5. A retailer collects $10,000 sales revenue plus $600 sales tax. What is the
$600?
A. Revenue
B. A sales tax liability
C. Inventory
D. Equity
Answer: B. A sales tax liability
Rationale: The retailer collects the tax for the taxing authority.
6. Customer advances before performance are generally recorded as what?
A. Contract liabilities
B. Bad debt expense
C. Treasury stock
D. Gains
Answer: A. Contract liabilities
Rationale: The company owes goods or services to the customer.
7. A company initially records $24,000 deferred subscription revenue. After
earning one fourth, what liability remains?
A. $6,000
B. $12,000
C. $18,000
D. $24,000
Answer: C. $18,000
Rationale: Revenue earned is $6,000, leaving $18,000 unearned.
8. Employee payroll deductions withheld but not remitted are generally
what?
A. Employer revenue
B. Liabilities
C. Assets
D. Dividends
Answer: B. Liabilities
Rationale: The employer owes those amounts to the designated recipients.
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, 9. Compensated absences are generally accrued when attributable to past
service, vesting or accumulating, probable, and what?
A. Impossible to estimate
B. Reasonably estimable
C. Paid only in stock
D. Unrelated to employees
Answer: B. Reasonably estimable
Rationale: Reasonable measurement is one of the accrual conditions.
10. A probable and reasonably estimable litigation loss generally requires
what?
A. Accrual
B. Revenue recognition
C. No disclosure
D. An asset
Answer: A. Accrual
Rationale: Both the loss and liability are recognized.
11. A material litigation loss is reasonably possible but not probable. What is
generally appropriate?
A. Accrue the maximum
B. Disclose without accruing
C. Recognize a gain
D. Ignore it
Answer: B. Disclose without accruing
Rationale: Reasonably possible losses generally require note disclosure.
12. A loss contingency is remote. Absent special disclosure requirements,
what is generally appropriate?
A. Accrue the maximum
B. Neither accrue nor disclose
C. Recognize revenue
D. Increase inventory
Answer: B. Neither accrue nor disclose
Rationale: Remote losses generally do not require recognition or disclosure.
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