WGU D366 Section 2 || Questions and 100% Accurate
Answers.
What constitutes representational fairness of financial information? correct answers An error-free
accounts receivable balance
What is one challenge in valuing assets and liabilities under the mixed attribute measurement
model? correct answers Deciding on the proper valuation method of certain assets and liabilities
Valuation methods include historical, fair value, and mixes of the two. Each method will give
different results, affecting both the balance sheet and income statement.
A company purchased a truck with a list price of $200,000 subject to a 5% discount if paid
within 30 days. The company paid within 30 days, so it received the discount. It paid $3,000 to
obtain the title to the truck and a $700 license fee for the first year of operation. It paid $1,000 to
paint the firm's name on the truck and $2,000 for property and liability insurance for the first
year of operation.
What is the acquisition cost of this truck that the company should record in its accounting
records? correct answers $194,000
An aircraft manufacturer sold a plane to an airline on January 1, 2020. The sales agreement
required the airline to pay $1 million immediately and $1 million on December 31 of each year
for 20 years, beginning on December 31, 2020. The aircraft manufacturer and airline agree that
7% is an appropriate interest rate for this arrangement.
What is the present value of the receivable on the aircraft manufacturer's books on January 1,
2020, immediately after receiving the $1 million down payment? correct answers $10,594,014
A company purchased land, prepared it for use, and constructed a building on it. The costs were
as follows:
Purchase price of the land$250,000Commission paid to real estate agent$10,000Rezoning permit
fee$7,500Cost of razing and removing existing building$25,000Cash received for scraps of old
building materials$7,000Construction cost of new building$500,000Cost of landscaping the
property$28,000Cost of property taxes for first year of occupation$15,000
What should the company record as the cost of the land on the balance sheet? correct answers
$285,500
Which of these would be recorded on a company's balance sheet as an asset? correct answers An
increase in the value of stocks of another company held as an investment
What represents an exchange of economic value in terms of revenue recognition? correct
answers Comprehensive income is realized in a market transaction
Two friends contribute $40,000 each to form a new business. The owners use this amount to
purchase a piece of equipment for $80,000 cash. They estimated that the useful life of the
equipment is five years, and the salvage value is $15,000. They rent out the equipment to a
customer for an annual rental of $20,000 per year for five years. Annual cash operating costs for
, insurance, taxes, and the other items total $5,000 annually. At the end of the fifth year, the
owners sell the equipment for $18,000 instead of the original estimated $15,000 salvage value.
What is the total net income for the five-year period? correct answers $13,000
Two friends contribute $40,000 each to form a new business. The owners use the contriubtions
to purchase a piece of equipment for $80,000 cash. They estimate that the useful life of the
equipment is five years, and the salvage value is $15,000. They rent out the equipment to a
customer for an annual rental of $20,000 per year for five years. Annual cash operating costs for
insurance, taxes, and other items totals $5,000 annually. At the end of the fifth year, the owners
sell the equipment for $18,000 instead of the $15,000 salvage value initially estimated.
What is the total amount of cash flows for the five-year period? correct answers $93,000
Total cash flows for the five-year period is calculated as:Contributions by owners - Purchase of
equipment + (Annual rent revenue x 5) - (Annual operating expenses x 5) + Sale of equipment=
$80,000 - $80,000 + ($20,000 x 5) - ($5,000 x 5) + $18,000= $80,000 - $80,000 + $100,000 -
$25,000 + $18,000= $93,000
A company purchases a tract of land on January 1, 2018. The following information summarizes
the changes in value:
Cash purchase price on Jan 1, 2018$150,000Market value on Dec 31, 2018$200,000Market
value on Dec 31, 2019$180,000Market value on Dec 31, 2020$250,000Cash sales price on Dec
31, 2021$270,000
Which amount of gain would the company report on its income statement for 2021? correct
answers $120,000
A company purchases marketable securities on January 1, 2018. The following information
summarizes the changes in value:
Cash purchase price on Jan 1, 2018$50,000Market value on Dec 31, 2018$70,000Market value
on Dec 31, 2019$65,000Market value on Dec 31, 2020$90,000Cash sales price on Dec 31,
2021$105,000
Which amount of gain would the company report on its income statement for 2021? correct
answers $15,000
The amount of gain reported is calculated as the difference between the selling price ($105,000)
and the market value reflected on the 2020 balance sheet ($90,000).
A company purchases a building in a foreign country on January 1, 2018. The following
information summarizes the change in value:
U.S. $ equivalent cash purchase price on Jan 1, 2018$750,000U.S. $ equivalent based on
exchange rate on Dec 31, 2018$790,000U.S. $ equivalent based on exchange rate on Dec 31,
2019$765,000U.S. $ equivalent based on exchange rate on Dec 31, 2020$810,000U.S. $
equivalent cash sales price on Dec 31, 2021$830,000
What amount of unrealized gain would the company report on its comprehensive income
statement for 2020? correct answers $45,000 unrealized gain
