WGU D104 Intermediate Accounting II Units 4-6 Exam Solved 100% Correct
Question : A company issued a 5-year note payable in the
amount of $15,000. The note bears the market interest rate of 5%. At Year 3, the market rate of interest is 3%. Which journal entry is appropriate for recording interest at the end of the third year? A. Debit Interest Expense for $450; credit Cash for $450 B. Debit Interest Expense for $750; credit Discount on Note Payable for $300; credit Cash for $450 C.Debit Interest Expense for $750; credit Cash for $750 D.Debit Interest Expense for $450; debit Premium on Note Payable for $300; credit Cash for $750
CORRECT ANSWER : C. Debit Interest Expense for $750;
credit Cash for 750 750 750 = $15,000 x 0.05. When the stated and effective interest rates are the same, annual interest is calculated by multiplying the face of the note times the interest rate. Interest rates do not change in subsequent years if the market rate changes.
Question : Equipment is placed in service on January 1. The
cost of the equipment is $250,000 with a salvage value of $25,000 and an estimated useful life of five years. Which amount of annual depreciation expense should be recorded on December 31 of Year 2 under the sum-of-years'-digits method? $45,000 $60,000 $75,000 $100,000
CORRECT ANSWER : $60,000
Question : A company placed an asset into service on Day 1
of Year 1 with the following data related to the purchase: Cost
of machinery $225,000Estimated salvage value $75,000Product life hours 75,000 hoursUseful life 5 years Hours used in Year 1 5,000 hoursWhich amount of annual depreciation expense should be recorded in the first year using the activity method? $3,000 $10,000 $15,000 $30,000
CORRECT ANSWER :
10 , 000
10,000
225,000-
75 , 000 =
75,000=
150,000($150,000*5,000 hours)/75,000
Question : On July 1, a company placed into service a vehicle
for $50,000 with an estimated useful life of five years and no salvage value. The company prepares accrual-basis financial statements on a calendar-year basis. How many months should be included in the calculation of depreciation expense for the year of acquisition using the double-declining-balance method? 5 6 7 12
CORRECT ANSWER : 6
Question : A company purchased a piece of equipment for
$120,000 and estimated that the asset will have no salvage value at the end of its 15-year useful life. At the end of Year 5 of ownership, when accumulated depreciation was $40,000 and the asset's book value was $80,000, the company revised
the asset's estimated useful life to a total of 10 years. What is the appropriate accounting treatment beginning with Year 6?The equipment will depreciate $80,000 over the next five years. The equipment will depreciate $40,000 over the next five years. The equipment will depreciate $40,000 over the next 10 years. The equipment will depreciate $80,000 over the next 10 years.
CORRECT ANSWER : The equipment will depreciate
$80,000 over the next five years.
Question : A company using the composite approach to
depreciation sells equipment for $10,000. The equipment was purchased five years earlier for $15,000, and the company has already recorded $5,000 in accumulated depreciation. What is included in the journal entry for the sale of the equipment?Debit loss on sale of equipment for $5,000 Credit loss on sale of equipment for $5,000 Debit accumulated depreciation- equipment for $5,000 Credit accumulated depreciation- equipment for $5,000
CORRECT ANSWER : Debit accumulated depreciation-
equipment for $5,000