Question 1

The criteria for recognition of revenue at the completion of production of precious metals and farm products include

Accepted Answer

A)  an established market with quoted prices. 
B)  low additional costs of completion and selling. 
C)  units are interchangeable. 
D)  All of these answers are correct. 
A)  an established market with quoted prices. 
B)  low additional costs of completion and selling. 
C)  units are interchangeable. 
D)  All of these answers are correct.

Question 2

Use the following information for questions 65-68:
Seasons Construction is constructing an office building under contract for Cannon Company. The contract calls for progress billings and payments of $1,240,000 each quarter. The total contract price is $14,880,000 and Seasons estimates total costs of $14,200,000. Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2014.
-At December 31, 2015, Seasons Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $14,400,000 due to unanticipated price increases. What is the total amount of Construction Expenses that Seasons will recognize for the year ended December 31, 2015?

Accepted Answer

A)  $10,800,000 
B)  $6,300,000 
C)  $6,390,000 
D)  $6,540,000 
A)  $10,800,000 
B)  $6,300,000 
C)  $6,390,000 
D)  $6,540,000

Question 3

The realization of income on installment sales transactions involves

Accepted Answer

A)  recognition of the difference between the cash collected on installment sales and the cash expenses incurred. 
B)  recording the net income related to installment sales and recognizing the income as cash is collected. 
C)  deferring gross profit while recognizing operating or financial expenses in the period incurred. 
D)  deferring gross profit and all additional expenses related to installment sales until cash is ultimately collected. 
A)  recognition of the difference between the cash collected on installment sales and the cash expenses incurred. 
B)  recording the net income related to installment sales and recognizing the income as cash is collected. 
C)  deferring gross profit while recognizing operating or financial expenses in the period incurred. 
D)  deferring gross profit and all additional expenses related to installment sales until cash is ultimately collected.

Question 4

Use the following information for questions 99 - 101.
During 2014, Martin Corporation sold merchandise costing $3,500,000 on an installment basis for $5,000,000. The cash receipts related to these sales were collected as follows: 2014, $2,000,000; 2015, $1,750,000; 2016, $1,250,000.
-If expenses, other than the cost of the merchandise sold, related to the 2014 installment sales amounted to $200,000, by what amount would Martin's net income for 2014 increase as a result of installment sales?

Accepted Answer

A)  $1,800,000 
B)  $ 600,000 
C)  $ 450,000 
D)  $ 400,000 
A)  $1,800,000 
B)  $ 600,000 
C)  $ 450,000 
D)  $ 400,000

Question 5

Dexter purchases equipment from Ray Company for a price of $5,000,000 and chooses Ray to do the installation. Ray doesn't charge for the installation of equipment. The price of the installation service is estimated to have a fair value of $60,000. Assuming the transaction to be multiple-deliverable arrangement, compute the amount to be allocated to installation.

Accepted Answer

A)  $59,289 
B)  $60,720 
C)  $60,000 
D)  $61,457 
A)  $59,289 
B)  $60,720 
C)  $60,000 
D)  $61,457

Question 6

On February 1, 2014, Marsh Contractors agreed to construct a building at a contract price of $5,800,000. Marsh estimated total construction costs would be $4,000,000 and the project would be finished in 2016. Information relating to the costs and billings for this contract is as follows:   
InstructionsFill in the correct amounts on the following schedule. For percentage-of-completion accounting and for completed-contract accounting, show the gross profit that should be recorded for 2014, 2015, and 2016.

Accepted Answer

The answer of On February 1, 2014, Marsh Contractors agreed...

Question 7

In selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be

Accepted Answer

A)  the terms of payment in the contract. 
B)  the degree to which a reliable estimate of the costs to complete and extent of progress toward completion is practicable. 
C)  the method commonly used by the contractor to account for other long-term construction contracts. 
D)  the inherent nature of the contractor's technical facilities used in construction. 
A)  the terms of payment in the contract. 
B)  the degree to which a reliable estimate of the costs to complete and extent of progress toward completion is practicable. 
C)  the method commonly used by the contractor to account for other long-term construction contracts. 
D)  the inherent nature of the contractor's technical facilities used in construction.

Question 8

Continuing franchise fees should be recorded by the franchisor

Accepted Answer

A)  as revenue when earned and receivable from the franchisee. 
B)  as revenue when received. 
C)  in accordance with the accounting procedures specified in the franchise agreement. 
D)  as revenue only after the balance of the initial franchise fee has been collected. 
A)  as revenue when earned and receivable from the franchisee. 
B)  as revenue when received. 
C)  in accordance with the accounting procedures specified in the franchise agreement. 
D)  as revenue only after the balance of the initial franchise fee has been collected.

Question 9

Companies recognize profit under the cost-recovery method only when cash collections exceed the total cost of the goods sold.

Accepted Answer

A) True 
 B)False

Question 10

Under the completed-contract method

Accepted Answer

A)  revenue, cost, and gross profit are recognized during the production cycle. 
B)  revenue and cost are recognized during the production cycle, but gross profit recognition is deferred until the contract is completed. 
C)  revenue, cost, and gross profit are recognized at the time the contract is completed. 
D)  None of these answers are correct. 
A)  revenue, cost, and gross profit are recognized during the production cycle. 
B)  revenue and cost are recognized during the production cycle, but gross profit recognition is deferred until the contract is completed. 
C)  revenue, cost, and gross profit are recognized at the time the contract is completed. 
D)  None of these answers are correct.

Question 11

IFRS requires immediate recognition of a loss if the overall contract is going to be unprofitable.

Accepted Answer

A) True 
 B)False

Question 12

An alternative available when the seller is exposed to continued risks of ownership through return of the product is

Accepted Answer

A)  recording the sale, and accounting for returns as they occur in future periods. 
B)  not recording a sale until all return privileges have expired. 
C)  recording the sale, but reducing sales by an estimate of future returns. 
D)  All of these answers are correct. 
A)  recording the sale, and accounting for returns as they occur in future periods. 
B)  not recording a sale until all return privileges have expired. 
C)  recording the sale, but reducing sales by an estimate of future returns. 
D)  All of these answers are correct.

Question 13

The principal disadvantage of using the percentage-of-completion method of recognizing revenue from long-term contracts is that it

Accepted Answer

A)  is unacceptable for income tax purposes. 
B)  gives results based upon estimates which may be subject to considerable uncertainty. 
C)  is likely to assign a small amount of revenue to a period during which much revenue was actually earned. 
D)  None of these answers are correct. 
A)  is unacceptable for income tax purposes. 
B)  gives results based upon estimates which may be subject to considerable uncertainty. 
C)  is likely to assign a small amount of revenue to a period during which much revenue was actually earned. 
D)  None of these answers are correct.

Question 14

Braun, Inc. appropriately uses the installment-sales method of accounting to recognize income in its financial statements. Some pertinent data relating to this method of accounting include:   What amount of installment accounts receivable should be presented in Braun's December 31, 2015 balance sheet?

Accepted Answer

A)  $720,000 
B)  $810,000 
C)  $780,000 
D)  $866,666 
A)  $720,000 
B)  $810,000 
C)  $780,000 
D)  $866,666

Question 15

Houser Appliances accounts for all sales of its merchandise on the installment basis. Following is the unadjusted trial balance at 12/31/16.   Additional information:2014 gross profit rate: 30%Total cash receipts during 2016: $110,000Merchandise sold in 2015 was repossessed in 2016 and the following entry was prepared:   
Instructions
(a) What is the gross profit rate for 2015? Show supporting computations.
(b) What is the gross profit rate for 2016? Show supporting computations.
(c) Of the total cash receipts in 2016, how much represents collections from installment sales of: (Show supporting computations.)(1) 2014?(2) 2015?(3) 2016?(d) What is the total realized gross profit in 2016? Show supporting computations.

Accepted Answer

@#IMG-DLM& *Excluding accounts

Question 16

If the difference between the Construction in Process and the Billings on Construction in Process account balances is a debit, the difference is reported as a current asset.

Accepted Answer

A) True 
 B)False

Question 17

Hayes Construction Corporation contracted to construct a building for $4,500,000. Construction began in 2014 and was completed in 2015. Data relating to the contract are summarized below:   Hayes uses the percentage-of-completion method as the basis for income recognition. For the years ended December 31, 2014, and 2015, respectively, Hayes should report gross profit of

Accepted Answer

A)  $810,000 and $540,000. 
B)  $2,700,000 and $1,800,000. 
C)  $900,000 and $450,000. 
D)  $0 and $1,350,000. 
A)  $810,000 and $540,000. 
B)  $2,700,000 and $1,800,000. 
C)  $900,000 and $450,000. 
D)  $0 and $1,350,000.

Question 18

Use the following information for questions 86 through 88.
Gorman Construction Co. began operations in 2015. Construction activity for 2015 is shown below. Gorman uses the completed-contract method.  
-Which of the following should be shown on the balance sheet at December 31, 2015 related to Contract 2?

Accepted Answer

A)  Inventory, $680,000 
B)  Inventory, $820,000 
C)  Current liability, $680,000 
D)  Current liability, $1,500,000 
A)  Inventory, $680,000 
B)  Inventory, $820,000 
C)  Current liability, $680,000 
D)  Current liability, $1,500,000

Question 19

Use the following information for questions 86 through 88.
Gorman Construction Co. began operations in 2015. Construction activity for 2015 is shown below. Gorman uses the completed-contract method.  
-Which of the following should be shown on the income statement for 2015 related to Contract 1?

Accepted Answer

A)  Gross profit, $675,000 
B)  Gross profit, $1,500,000 
C)  Gross profit, $1,575,000 
D)  Gross profit, $900,000 
A)  Gross profit, $675,000 
B)  Gross profit, $1,500,000 
C)  Gross profit, $1,575,000 
D)  Gross profit, $900,000

Question 20

Hogan Farms produced 1,600,000 pounds of cotton during the 2015 season. Hogan sells all of its cotton to Ott Co., which has agreed to purchase Hogan's entire production at the prevailing market price. Recent legislation assures that the market price will not fall below $.70 per pound during the next two years. Hogan's costs of selling and distributing the cotton are immaterial and can be reasonably estimated. Hogan reports its inventory at expected exit value. During 2015, Hogan sold and delivered to Ott 1,200,000 pounds at the market price of $.70. Hogan sold the remaining 400,000 pounds during 2016 at the market price of $.72. What amount of revenue should Hogan recognize in 2015?

Accepted Answer

A)  $840,000 
B)  $864,000 
C)  $1,120,000 
D)  $1,152,000 
A)  $840,000 
B)  $864,000 
C)  $1,120,000 
D)  $1,152,000

The criteria for recognition of revenue at the completion of production of precious metals and farm products include

The realization of income on installment sales transactions involves

In selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be

Continuing franchise fees should be recorded by the franchisor

Companies recognize profit under the cost-recovery method only when cash collections exceed the total cost of the goods sold.

Under the completed-contract method

IFRS requires immediate recognition of a loss if the overall contract is going to be unprofitable.

An alternative available when the seller is exposed to continued risks of ownership through return of the product is

The principal disadvantage of using the percentage-of-completion method of recognizing revenue from long-term contracts is that it

Braun, Inc. appropriately uses the installment-sales method of accounting to recognize income in its financial statements. Some pertinent data relating to this method of accounting include: What amount of installment accounts receivable should be presented in Braun's December 31, 2015 balance sheet?

If the difference between the Construction in Process and the Billings on Construction in Process account balances is a debit, the difference is reported as a current asset.

Use the following information for questions 86 through 88. Gorman Construction Co. began operations in 2015. Construction activity for 2015 is shown below. Gorman uses the completed-contract method. -Which of the following should be shown on the income statement for 2015 related to Contract 1?

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

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Exam 18: Revenue Recognition

The criteria for recognition of revenue at the completion of production of precious metals and farm products include

The realization of income on installment sales transactions involves

In selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be

Continuing franchise fees should be recorded by the franchisor

Companies recognize profit under the cost-recovery method only when cash collections exceed the total cost of the goods sold.

Under the completed-contract method

IFRS requires immediate recognition of a loss if the overall contract is going to be unprofitable.

An alternative available when the seller is exposed to continued risks of ownership through return of the product is

The principal disadvantage of using the percentage-of-completion method of recognizing revenue from long-term contracts is that it

If the difference between the Construction in Process and the Billings on Construction in Process account balances is a debit, the difference is reported as a current asset.

Use the following information for questions 86 through 88. Gorman Construction Co. began operations in 2015. Construction activity for 2015 is shown below. Gorman uses the completed-contract method. -Which of the following should be shown on the income statement for 2015 related to Contract 1?

Financial Accounting and Accounting Standards

Conceptual Framework for Financial Reporting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

Long-Term Liabilities

Stockholders Equity

Dilutive Securities and Earnings Per Share

Investments

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Full Disclosure in Financial Reporting

Appendix

Filters