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WGU C366 Part 2 Test| Questions Solved with 100% Correct & Verified Answers
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WGU C366 Part 2 Test| Questions Solved with 100% Correct & Verified Answers
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WGU C366 Part 2 Test| Questions Solved with100% Correct & Verified Answers
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? - ✔✔$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? - ✔✔$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? -
✔✔$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? -
✔✔$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? - ✔✔$45,000 unrealized gain
The amount of unrealized gain reported as other comprehensive income is calculated as
the difference between the exchange rate equivalent, as reflected on the 2020 balance
sheet ($810,000), and the exchange rate equivalent on Dec 31, 2019 ($765,000).
What is an example of a permanent difference? - ✔✔Interest earned on a municipal
bond
, Interest earned on a municipal bond is a permanent difference (i.e., it is included in net
income for financial reporting but will never appear on the income tax return as taxable
income).
What is an example of a temporary difference? - ✔✔Straight-line depreciation
expense
A company's income tax return shows income taxes for 2021 of $34,000. The company
reports the following information:
Income Taxes for 2021 from income tax return$34,000Deferred Tax Assets (DTA) before
valuation allowance at beginning of 2021$24,000Deferred Tax Assets (DTA) at end of
2021$27,000Deferred Tax Liabilities (DTL) at beginning of 2021$19,000Deferred Tax
Liabilities (DTL) at end of 2021$16,500Valuation Allowance on DTA at beginning of
2021$6,500Valuation Allowance on DTA at end of 2021$7,000
What is the amount of income tax expense for 2021? - ✔✔$29,000
A company's income tax return shows $50,000 of income taxes owed for 2021. For
financial reporting, the firm reports the following:
Income Taxes for 2021 from income tax return$50,000Deferred Tax Assets (DTA) at
beginning of 2021$42,900Deferred Tax Assets (DTA) at end of 2021$38,700Deferred Tax
Liabilities (DTL) at beginning of 2021$28,600Deferred Tax Liabilities (DTL) at end of
2021$34,200
What is the amount of income tax expense for 2021? - ✔✔$59,800
A company's income tax return shows $50,000 of income taxes owed for 2021. For
financial reporting, the firm reports the following information:
Income Taxes for 2021 from income tax return$50,000Deferred Tax Assets (DTA) at
beginning of 2021$42,900Deferred Tax Assets (DTA) at end of 2021$38,700Deferred Tax
Liabilities (DTL) at beginning of 2021$58,600Deferred Tax Liabilities (DTL) at end of
2021$47,100
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