WGU D104 Intermediate Accounting II Study Guide Which method should be used to handle indirect costs of self -constructed assets? Assigning no variable overhead to a constructed asset Allocating overhead on the basis of gained production Assigning a pro rata portion of all overhead to the asset Alloc ating the total overhead to the asset - ✔✔ Assigning a pro rata portion of all overhead to the asset A company purchases land for development into a subdivision. The land has a factory building on it that will need to be demolished. Where should the interest costs be allocated? Interest expenses General administrative expenses Cost of the land Cost of the plant - ✔✔ Cost of land In which situation can capitalization of interest be included in the cost of land? When holding the land as an investment When purchasing land with the intension of developing it for lots sales When selling the land When building a structure on the land - ✔✔ When purchasing land with the intension of developing it for lots sales Which value should be used to record machinery that was purchased with a long -term note? Sum of all estimated payments Market price of the machinery Present value of the future payments Appraised value of the machinery - ✔✔ Present value of the future payments Which item is considered to be a technology -related intangible asset? Trade secrets Goodwill Artistic -related rights Licensing agreements - ✔✔ Trade Sec rets Pay out ratio - ✔✔ Pay out ratio = cash dividends/net income (less preferred dividends, if applicable) Return on common stockholders' equity - ✔✔ Return on Common Stockholders' Equity = (Net Income - Preferred Dividends) / Average Common Stockholders' Equity Book value per share - ✔✔ Book Value per Share = common stockholders equity/outstanding shares Dilutive Securities - ✔✔ Are securities that can be converted to common stock. Upon conversion or exercise by the holder, the dilutive securities reduce (dilute) earnings per share Antidilutive securities - ✔✔ 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. A company using th e 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 - ✔✔ Debit accumulated depreciation -
equipment for $5, 000.
equipment for $5, 000.
