WGU D104 INTERMEDIATE ACCOUNTING
II PRACTICE EXAMINATION 2026
QUESTIONS WITH ANSWERS GRADED A+
◍ Participating preferred stock.
Answer: You may get more than the stated amount
◍ Projected Benefit Obligation (PBO).
Answer: Beginning PBO + Service cost - benefits paid = Ending PBO
◍ Do you capitalize an operating lease?.
Answer: No
◍ If a portion of a deferred tax asset will not be used:.
Answer: debit income tax expense and credit allowance to cancel it out. This
is a contra asset account
◍ Whats needed to capitalize a lease?.
Answer: Transfers ownership, over 75% of economic life
◍ Stock warrants.
Answer: Long term options to buy common stock at a fixed price. They are
dilutive
◍ Revenue vs Gain.
Answer: Revenue is from ordinary ops, gains occur outside of ordinary ops
◍ What is the journal entry for a lease as the lessee?.
Answer: Debit leased equipment, credit lease liability
◍ Accumulated Benefit obligation.
Answer: benefits for nonvested employees at current salaries
◍ A company has 10,000 shares of $6 par value common stock outstanding.
, The market value of the stock is $10. What is the impact of a 2-for-1 stock
split?Retained earnings is reduced by $100,000.Par value of the stock is is
reduced to $3 per share.The number of shares of stock outstanding is
reduced to 5,000.Paid-in Capital in Excess of Par Value - Common Stock is
reduced by $30,000..
Answer: Par value of the stock is is reduced to $3 per share.
◍ Valuate equities with intent to control.
Answer: Valuate at equity method
◍ Antidilutive securities.
Answer: Securities, which upon conversion or exercise, increase earnings
per share (or reduce the loss per share). Companies with complex capital
structures will not report diluted EPS if the securities in their capital
structure are antidilutive; they will report only the basic EPS number.
◍ Stock appreciation rights.
Answer: Gives an executive the right to receive compensation equal to the
share appreciation: excess of the market price over the ore-established price
◍ Income tax expense.
Answer: Book income, pretax income
◍ depletion cost per unit.
Answer: (total cost - salvage value) / total estimated units available
◍ Return on common stockholders' equity.
Answer: Return on Common Stockholders' Equity = (Net Income - Preferred
Dividends) / Average Common Stockholders' Equity
◍ Forward contract.
Answer: You have the right and the obligation to buy or sell something in
the future at a price set today. Not traded in a market
◍ Treasury stock- Cost method.
Answer: So stock can be re-issued
◍ A company issues bonds at par with a 10-year term for $1,000,000 on
, January 1 of Year 1. The bonds bear interest at an annual rate of 7% payable
semiannually on January 1 and July 1. Which journal entry should be
recorded on July 1 of Year 1?Debit Interest Expense for $70,000; Credit
Bonds Payable for $70,000Debit Interest Expense for $70,000; Credit Cash
for $70,000Debit Interest Expense for $35,000; Credit Cash for
$35,000Debit Bonds Payable for $35,000: Credit Interest Expense for
$35,000.
Answer: Debit Interest Expense for $35,000; Credit Cash for $35,000
◍ Fair value hedge.
Answer: Assets and liabilities recognized on financial statements
◍ What is a change of accounting estimate?.
Answer: New information and changes estimates prospectively
◍ Stock dividends effect on equity.
Answer: None
◍ What happens if FV<BV on a lease?.
Answer: The lessee must recognize the loss immediately
◍ Installment sales.
Answer: Defer gross profit as a current liability
◍ Earning per share capital.
Answer: Net income - Preferred dividends / Weighted number of shares
outstanding
◍ Loss on an unprofitable contract.
Answer: Both methods- Recognize in current period the entire expected
(estimated) loss
◍ unguaranteed residual value.
Answer: Is accounted for as the same as if there were no residual value.
◍ In which situation can capitalization of interest be included in the cost of
land?When holding the land as an investmentWhen purchasing land with the
intension of developing it for lots salesWhen selling the landWhen building
II PRACTICE EXAMINATION 2026
QUESTIONS WITH ANSWERS GRADED A+
◍ Participating preferred stock.
Answer: You may get more than the stated amount
◍ Projected Benefit Obligation (PBO).
Answer: Beginning PBO + Service cost - benefits paid = Ending PBO
◍ Do you capitalize an operating lease?.
Answer: No
◍ If a portion of a deferred tax asset will not be used:.
Answer: debit income tax expense and credit allowance to cancel it out. This
is a contra asset account
◍ Whats needed to capitalize a lease?.
Answer: Transfers ownership, over 75% of economic life
◍ Stock warrants.
Answer: Long term options to buy common stock at a fixed price. They are
dilutive
◍ Revenue vs Gain.
Answer: Revenue is from ordinary ops, gains occur outside of ordinary ops
◍ What is the journal entry for a lease as the lessee?.
Answer: Debit leased equipment, credit lease liability
◍ Accumulated Benefit obligation.
Answer: benefits for nonvested employees at current salaries
◍ A company has 10,000 shares of $6 par value common stock outstanding.
, The market value of the stock is $10. What is the impact of a 2-for-1 stock
split?Retained earnings is reduced by $100,000.Par value of the stock is is
reduced to $3 per share.The number of shares of stock outstanding is
reduced to 5,000.Paid-in Capital in Excess of Par Value - Common Stock is
reduced by $30,000..
Answer: Par value of the stock is is reduced to $3 per share.
◍ Valuate equities with intent to control.
Answer: Valuate at equity method
◍ Antidilutive securities.
Answer: Securities, which upon conversion or exercise, increase earnings
per share (or reduce the loss per share). Companies with complex capital
structures will not report diluted EPS if the securities in their capital
structure are antidilutive; they will report only the basic EPS number.
◍ Stock appreciation rights.
Answer: Gives an executive the right to receive compensation equal to the
share appreciation: excess of the market price over the ore-established price
◍ Income tax expense.
Answer: Book income, pretax income
◍ depletion cost per unit.
Answer: (total cost - salvage value) / total estimated units available
◍ Return on common stockholders' equity.
Answer: Return on Common Stockholders' Equity = (Net Income - Preferred
Dividends) / Average Common Stockholders' Equity
◍ Forward contract.
Answer: You have the right and the obligation to buy or sell something in
the future at a price set today. Not traded in a market
◍ Treasury stock- Cost method.
Answer: So stock can be re-issued
◍ A company issues bonds at par with a 10-year term for $1,000,000 on
, January 1 of Year 1. The bonds bear interest at an annual rate of 7% payable
semiannually on January 1 and July 1. Which journal entry should be
recorded on July 1 of Year 1?Debit Interest Expense for $70,000; Credit
Bonds Payable for $70,000Debit Interest Expense for $70,000; Credit Cash
for $70,000Debit Interest Expense for $35,000; Credit Cash for
$35,000Debit Bonds Payable for $35,000: Credit Interest Expense for
$35,000.
Answer: Debit Interest Expense for $35,000; Credit Cash for $35,000
◍ Fair value hedge.
Answer: Assets and liabilities recognized on financial statements
◍ What is a change of accounting estimate?.
Answer: New information and changes estimates prospectively
◍ Stock dividends effect on equity.
Answer: None
◍ What happens if FV<BV on a lease?.
Answer: The lessee must recognize the loss immediately
◍ Installment sales.
Answer: Defer gross profit as a current liability
◍ Earning per share capital.
Answer: Net income - Preferred dividends / Weighted number of shares
outstanding
◍ Loss on an unprofitable contract.
Answer: Both methods- Recognize in current period the entire expected
(estimated) loss
◍ unguaranteed residual value.
Answer: Is accounted for as the same as if there were no residual value.
◍ In which situation can capitalization of interest be included in the cost of
land?When holding the land as an investmentWhen purchasing land with the
intension of developing it for lots salesWhen selling the landWhen building
