INTERMEDIATE ACCOUNTING III WGU D105 PA 1 CH 2-4 EXAM QUESTIONS & DETAILED ANSWERS

INTERMEDIATE ACCOUNTING III WGU D105 PA
1 CH 2-4 EXAM QUESTIONS & DETAILED
ANSWERS
1. Which situation will result in a temporary computation
difference between financial accounting of
and tax accounting? comprehens
ive income
A company received life insurance proceeds in the
reported as financial income but not as taxable current
income. year.
A company used straight-line depreciation for Record the
financial accounting and an accelerated realized loss
method for tax. by recording
A company listed municipal bond income as a contra
net in- come in financial accounting but not in account to
tax account- ing. the bond
A company received dividends from another investment
company in which it has ownership. account.
Eliminate the
2. A company had classified a bond as available
realized loss
for sale in the past and recorded changes in
from the
the market value each year properly in other
computation
comprehensive income.
of net
The company sold these bonds and realized a
income in
loss
the current
in the current year, which reduced
year.
comprehensive in- come and net income.
To avoid double-counting this loss, what should
the company do?
Record the realized loss by making an
adjustment to beginning retained earnings in
the current year.
Eliminate the realized loss from the
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, INTERMEDIATE ACCOUNTING III WGU D105 PA
1 CH 2-4 EXAM QUESTIONS & DETAILED
ANSWERS
A company used
straight-line depreciation for financial account-
ing and an accelerated method for tax.
Eliminate the realized
loss from the
computation of
comprehensive income
in the current year.

3. Which debt security is purchased with the intent to sell Trading
within three months to generate income on short-term




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