WGU D104 Intermediate Accounting II Units 4-6 Exam Solved 100% Correct

Asset Turnover Ratio - ANSWER-net sales/average total assets Profit Margin Ratio - ANSWER-net income/total sales Rate of return on assets - ANSWER-net income/average total assets Current ratio - ANSWER-current assets/current liabilities acid-test ratio - ANSWER-(cash + short-term investments + net receivables) / current liabilities rate of return on common stock equity - ANSWER-(net income - preferred dividends) / average common stockholders' equity payout ratio - ANSWER-cash dividends / (net income - preferred dividends) book value per share - ANSWER-common stockholders' equity / outstanding shares sum-of-the-years'-digits method - ANSWER-Accelerated depreciation with higher depreciation cost in beginning and lower charges in the end. Numerator is the # of years of est. life remaining at the 1st of the year, denominator is sum of the years individually. (e.g. 5/15, 4/15, 3/15, 2/15, 1/15) Variable charge depreciation method (activity method or units-of-activity/ production approach) - ANSWER-((cost - salvage value) X current units) / total estimated units activity method - ANSWER-(actual activity in period / total estimate activity) X (cost - salvage value) double declining balance method - ANSWER-An accelerated depreciation method that computes annual depreciation by multiplying the depreciable asset's decreasing book value by a constant percent that is two times the straight-line depreciation rate. Multiple assets group depreciation method - ANSWER-Assets similar in nature and have approx. same useful lives. Total of the annual depreciation expense for all assets in the group / total cost of the assets. Multiple assets composite depreciation method - ANSWER-Assets are dissimilar and have different lives. Total annual depreciation expense of all assets / total cost of all assets. Composite life - ANSWER-(Original cost - salvage value) / total annual depreciation Composite depreciation rate - ANSWER-Total annual depreciation of all assets / total cost of all assets. Journal entry for gain on sale of composite depreciation equipment - ANSWER-Debit cash & accumulated depreciation (subtract gain), credit equipment. Impairment - ANSWER-If the carrying amount exceeds the undiscounted future cash flows. Loss = carrying amount > fair value. Journal entry for impairment - ANSWER-Debit impairment loss, credit accumulated depreciation When is the restoration of an impairment loss permitted? - ANSWER-When an assets is held for disposal. Impairment loss is reported at the lower of cost or net realizable value (fair value - cost to sell/dispose) not to exceed amount of initial impairment loss. Depletion base for natural resources - ANSWER-(cost to acquire + cost to explore + cost to develop i.e. intangible costs + cost to restore). Tangible costs to extract resources depreciated separately. Natural resources depletion rate - ANSWER-(depletion base - salvage value) / total units to be recovered. Natural resources depletion expense - ANSWER-(depletion rate X units of usage) / extracted Journal entry to record ore extracted - ANSWER-Debit inventory (ore), credit mineral mine Journal entry to record the ore sold - ANSWER-Debit cost of goods sold, credit inventory (ore) Journal entry to record depletion expense for mine - ANSWER-Debit depletion expense, credit accumulated depletion Types of current liabilities - ANSWER-Accounts payable, notes payable, dividends payable, customer advances/deposits, unearned (deferred) revenues, sales tax payable, current maturities of long-term debt Journal entry to record issuance of a note - ANSWER-Debit cash, credit notes payable Journal entry to record payment of the note at maturity - ANSWER-Debit notes payable, debit interest expense, credit cash