WGU D104 INTERMEDIATE ACCOUNTING
II COMPREHENSIVE STUDY GUIDE 2026
FULL QUESTIONS AND SOLUTIONS
GRADED A+
◍ A company redeemed bonds before the maturity date with a reacquisition
price that was less than the current net carrying value. The original bond
issuance was recorded at 103. Which account should be debited in the
journal entry to record this transaction?.
Answer: Premium on Bonds Payable
◍ At December 31, 2017, Twin Rivers Company had 450,000 shares of
common stock issued and outstanding, 350,000 of which had been issued
and outstanding throughout the year and 100,000 of which were issued on
September 1, 2017. Net income for the year ended December 31, 2017, was
$1,160,000. What should be Twin Rivers' 2017 earnings per common share,
rounded to the nearest penny?.
Answer: $3.02
◍ Information available prior to the issuance of the financial statements
indicates that it is probable that, at the date of the financial statements, a
liability has been incurred for obligations related to product warranties. The
amount of the loss involved can be reasonably estimated.Based on the above
facts, how should the company report the estimated loss contingency?.
Answer: Accrued and disclosed
◍ A company purchases a factory and signs a 30-year mortgage with a face
value of $500,000 and a fixed interest rate of 6.75% per year. The bank is
requiring 4 points upon closing. How much should be recorded in the
Mortgages Payable account upon closing?.
, Answer: $500,000
◍ What is the numerator in the times interest earned ratio?.
Answer: Net income + (interest expense + income tax expense)
◍ Sandy Shoes Foot Inc. is involved in litigation regarding a faulty product
sold in a prior year. The company has consulted with its attorney and
determined that it is possible that they may lose the case. The attorney
estimated that there is a 40% chance of losing. If this is the case, their
attorney estimated that the amount of any payment would be $800,000.How
should this contingent liability be recorded?.
Answer: No journal entry is needed.
◍ What is the generally accepted method of accounting for gains or losses
from the early extinguishment of debt?.
Answer: A difference between the reacquisition price and the net carrying
amount of the debt which should be recognized in the period of redemption
◍ Posner Co. is a retail store operating in a state with a 7% retail sales tax. The
retailer may keep 2% of the sales tax collected. Posner Co. records the sales
tax in the Sales Revenue account. The amount recorded in the Sales
Revenue account during May was $754,350.What is the amount of sales tax
payable (to the nearest dollar) for May?.
Answer: $48,363
◍ A company borrows $20,000 by issuing a three-year note with a stated and
effective rate of 5%. How much will the company record in the Notes
Payable account upon signing the note?.
Answer: $20,000
◍ How should long-term debt that matures within one year and is to be
converted into stock be reported?.
Answer: As noncurrent and accompanied with a note explaining the method
to be used in its liquidation
◍ Who does the residual interest in a corporation belong to?.
Answer: The common stockholders
, ◍ A company reported the following accounts from its year-end balance sheet:
Cash: $50,000 Short-term investments: $125,000 Accounts receivable:
$230,000 Inventory: $720,000 Property, plant, and equipment, net:
$800,000 Investments: $95,000 Accounts payable: $193,000 Accrued
liabilities: $29,000 Current portion of long-term debt: $170,000 Long-term
debt: $715,000 Stockholder's equity: $963,000 What is the company's
debt-equity ratio?.
Answer: 1.1
◍ What does the current ratio inform you about a company?.
Answer: The company's liquidity
◍ A company declares a cash dividend on May 1, the date of record is May 15,
and the date of payment is June 11. The dividend is $3.00 per share. The
company only has common stock, and there are 10,000 shares authorized,
8,000 shares issued, and 5,000 shares outstanding. Which account should be
debited on June 11?.
Answer: Dividends payable for $15,000
◍ Posner Co. is a retail store operating in a state with a 7% retail sales tax. The
retailer may keep 2% of the sales tax collected. Posner Co. records the sales
tax in the Sales Revenue account. The amount recorded in the Sales
Revenue account during May was $754,350.What is the amount of sales tax
(to the nearest dollar) for May?.
Answer: $49,350
◍ On June 30, 2017, Baker Co. had outstanding 8%, $6,000,000 face amount,
15-year bonds maturing on June 30, 2027. Interest is payable on June 30 and
December 31. The unamortized balance in the bond discount account on
June 30, 2017 was $210,000. On June 30, 2017, Baker acquired all of these
bonds at 94 and retired them.What net carrying amount should be used in
computing gain or loss on this early extinguishment of debt?.
Answer: $5,790,000
◍ Which type of preferred stock generates a dividend in arrears?.
II COMPREHENSIVE STUDY GUIDE 2026
FULL QUESTIONS AND SOLUTIONS
GRADED A+
◍ A company redeemed bonds before the maturity date with a reacquisition
price that was less than the current net carrying value. The original bond
issuance was recorded at 103. Which account should be debited in the
journal entry to record this transaction?.
Answer: Premium on Bonds Payable
◍ At December 31, 2017, Twin Rivers Company had 450,000 shares of
common stock issued and outstanding, 350,000 of which had been issued
and outstanding throughout the year and 100,000 of which were issued on
September 1, 2017. Net income for the year ended December 31, 2017, was
$1,160,000. What should be Twin Rivers' 2017 earnings per common share,
rounded to the nearest penny?.
Answer: $3.02
◍ Information available prior to the issuance of the financial statements
indicates that it is probable that, at the date of the financial statements, a
liability has been incurred for obligations related to product warranties. The
amount of the loss involved can be reasonably estimated.Based on the above
facts, how should the company report the estimated loss contingency?.
Answer: Accrued and disclosed
◍ A company purchases a factory and signs a 30-year mortgage with a face
value of $500,000 and a fixed interest rate of 6.75% per year. The bank is
requiring 4 points upon closing. How much should be recorded in the
Mortgages Payable account upon closing?.
, Answer: $500,000
◍ What is the numerator in the times interest earned ratio?.
Answer: Net income + (interest expense + income tax expense)
◍ Sandy Shoes Foot Inc. is involved in litigation regarding a faulty product
sold in a prior year. The company has consulted with its attorney and
determined that it is possible that they may lose the case. The attorney
estimated that there is a 40% chance of losing. If this is the case, their
attorney estimated that the amount of any payment would be $800,000.How
should this contingent liability be recorded?.
Answer: No journal entry is needed.
◍ What is the generally accepted method of accounting for gains or losses
from the early extinguishment of debt?.
Answer: A difference between the reacquisition price and the net carrying
amount of the debt which should be recognized in the period of redemption
◍ Posner Co. is a retail store operating in a state with a 7% retail sales tax. The
retailer may keep 2% of the sales tax collected. Posner Co. records the sales
tax in the Sales Revenue account. The amount recorded in the Sales
Revenue account during May was $754,350.What is the amount of sales tax
payable (to the nearest dollar) for May?.
Answer: $48,363
◍ A company borrows $20,000 by issuing a three-year note with a stated and
effective rate of 5%. How much will the company record in the Notes
Payable account upon signing the note?.
Answer: $20,000
◍ How should long-term debt that matures within one year and is to be
converted into stock be reported?.
Answer: As noncurrent and accompanied with a note explaining the method
to be used in its liquidation
◍ Who does the residual interest in a corporation belong to?.
Answer: The common stockholders
, ◍ A company reported the following accounts from its year-end balance sheet:
Cash: $50,000 Short-term investments: $125,000 Accounts receivable:
$230,000 Inventory: $720,000 Property, plant, and equipment, net:
$800,000 Investments: $95,000 Accounts payable: $193,000 Accrued
liabilities: $29,000 Current portion of long-term debt: $170,000 Long-term
debt: $715,000 Stockholder's equity: $963,000 What is the company's
debt-equity ratio?.
Answer: 1.1
◍ What does the current ratio inform you about a company?.
Answer: The company's liquidity
◍ A company declares a cash dividend on May 1, the date of record is May 15,
and the date of payment is June 11. The dividend is $3.00 per share. The
company only has common stock, and there are 10,000 shares authorized,
8,000 shares issued, and 5,000 shares outstanding. Which account should be
debited on June 11?.
Answer: Dividends payable for $15,000
◍ Posner Co. is a retail store operating in a state with a 7% retail sales tax. The
retailer may keep 2% of the sales tax collected. Posner Co. records the sales
tax in the Sales Revenue account. The amount recorded in the Sales
Revenue account during May was $754,350.What is the amount of sales tax
(to the nearest dollar) for May?.
Answer: $49,350
◍ On June 30, 2017, Baker Co. had outstanding 8%, $6,000,000 face amount,
15-year bonds maturing on June 30, 2027. Interest is payable on June 30 and
December 31. The unamortized balance in the bond discount account on
June 30, 2017 was $210,000. On June 30, 2017, Baker acquired all of these
bonds at 94 and retired them.What net carrying amount should be used in
computing gain or loss on this early extinguishment of debt?.
Answer: $5,790,000
◍ Which type of preferred stock generates a dividend in arrears?.
