Question 1

The Construction in Progress account is what type of account?

Accepted Answer

A) liability 
B) revenue 
C) asset 
D) expense 
A) liability 
B) revenue 
C) asset 
D) expense C

Question 2

Refer to Thompson Industries.Assume that Thompson Industries uses the installment sales approach.Prepare all journal entries related to the sale of land,the collection of cash,and the recognition of gross profit.

Accepted Answer

The answer of Refer to Thompson Industries.Assume that Thompson Industries...

Question 3

Companies may use the completed-contract method for all long term contracts.

Accepted Answer

A) True 
 B)False  False

Question 4

Which of the following is not a major condition for revenue recognition under IFRS?

Accepted Answer

A) Persuasive evidence of an arrangement. 
B) Risks and rewards have transferred to the buyer. 
C) Revenues and costs can be reliably measured. 
D) Probable that economic benefits will flow to the seller. 
A) Persuasive evidence of an arrangement. 
B) Risks and rewards have transferred to the buyer. 
C) Revenues and costs can be reliably measured. 
D) Probable that economic benefits will flow to the seller.

Question 5

What are the disclosure requirements under United States GAAP for long-term contracts?

Accepted Answer

1.Percentage-of-completion method-Method

Question 6

Journal entries for the percentage-of-completion method are only made at the completion of the project.

Accepted Answer

A) True 
 B)False

Question 7

Explain a bill-and-hold arrangement.

Accepted Answer

A bill-and-hold arrangement is a transac

Question 8

Refer to Tullis Corporation.How much gross profit should Tullis recognize in Year 1 assuming the use of the completed-contract method?

Accepted Answer

A) $0 
B) $1,000,000 
C) $2,000,000 
D) $8,000,000 
A) $0 
B) $1,000,000 
C) $2,000,000 
D) $8,000,000

Question 9

When GAAP is used,revenue is recognized under the completed-contract method ________.

Accepted Answer

A) each year of the contract 
B) only the first year of the contract 
C) only the last year of the contract 
D) only when there is a loss on the contract 
A) each year of the contract 
B) only the first year of the contract 
C) only the last year of the contract 
D) only when there is a loss on the contract

Question 10

The major difference between the percentage-of-completion method and the completed-contract method is the timing of ________.

Accepted Answer

A) revenue and cost recognition 
B) revenue and billing recognition 
C) revenue and gross profit recognition 
D) revenue and net profit recognition 
A) revenue and cost recognition 
B) revenue and billing recognition 
C) revenue and gross profit recognition 
D) revenue and net profit recognition

Question 11

Refer to Craft Construction.Assume Craft uses the completed-contract method for revenue recognition.Compute the amount of gross profit for 2016 and 2017.

Accepted Answer

The answer of Refer to Craft Construction.Assume Craft uses the...

Question 12

Two methods used to account for revenue recognition for long term contracts are the percentage-of-completion method and the ________.

Accepted Answer

A) installment sales method 
B) cost recovery method 
C) completed-contract method 
D) sales method 
A) installment sales method 
B) cost recovery method 
C) completed-contract method 
D) sales method

Question 13

Deferred gross profit may be treated either as a contra-asset or a liability.

Accepted Answer

A) True 
 B)False

Question 14

It is necessary to compute a gross profit margin for installment sales for each year.

Accepted Answer

A) True 
 B)False

Question 15

When using the IFRS zero-gross profit approach,revenue is recognized ________.

Accepted Answer

A) each year of the contract 
B) only the first year of the contract 
C) only the last year of the contract 
D) only when there is a loss on the contract 
A) each year of the contract 
B) only the first year of the contract 
C) only the last year of the contract 
D) only when there is a loss on the contract

Question 16

Refer to LaGrow Developers.Assuming that LaGrow uses the cost-recovery method,the company would recognize gross profit in 2016 of ________.

Accepted Answer

A) $0 
B) $400,000 
C) $600,000 
D) $1,000,000 
A) $0 
B) $400,000 
C) $600,000 
D) $1,000,000

Question 17

Gleason Construction enters into a long-term fixed price contract to build an office building for $20,000,000.In the first year of the contract Camey incurs $6,000,000 of cost and the engineers determined that the remaining costs to complete are $15,000,000.How much gross profit or loss should Gleason recognize in Year 1 assuming the use of the completed-contract method?

Accepted Answer

A) $1,000,000 loss 
B) $1,000,000 profit 
C) $0 
D) $350,000 loss 
A) $1,000,000 loss 
B) $1,000,000 profit 
C) $0 
D) $350,000 loss

Question 18

Under IFRS,if a firm cannot reliably estimate the outcome of a construction contract,it uses the zero-gross profit approach.

Accepted Answer

A) True 
 B)False

Question 19

Refer to Craft Construction.Assume that Craft uses the completed-contract method for revenue recognition.Make the appropriate journal entries for 2016 and 2017 for Craft Company.

Accepted Answer

2016
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Question 20

GAAP and IFRS both allow a company to report service revenue using the percentage of completion method.

Accepted Answer

A) True 
 B)False

Exam 9: OL: Revenue Recognition

The Construction in Progress account is what type of account?

Refer to Thompson Industries.Assume that Thompson Industries uses the installment sales approach.Prepare all journal entries related to the sale of land,the collection of cash,and the recognition of gross profit.

Companies may use the completed-contract method for all long term contracts.

Which of the following is not a major condition for revenue recognition under IFRS?

What are the disclosure requirements under United States GAAP for long-term contracts?

Journal entries for the percentage-of-completion method are only made at the completion of the project.

Explain a bill-and-hold arrangement.

Refer to Tullis Corporation.How much gross profit should Tullis recognize in Year 1 assuming the use of the completed-contract method?

When GAAP is used,revenue is recognized under the completed-contract method ________.

The major difference between the percentage-of-completion method and the completed-contract method is the timing of ________.

Refer to Craft Construction.Assume Craft uses the completed-contract method for revenue recognition.Compute the amount of gross profit for 2016 and 2017.

Two methods used to account for revenue recognition for long term contracts are the percentage-of-completion method and the ________.

Deferred gross profit may be treated either as a contra-asset or a liability.

It is necessary to compute a gross profit margin for installment sales for each year.

When using the IFRS zero-gross profit approach,revenue is recognized ________.

Refer to LaGrow Developers.Assuming that LaGrow uses the cost-recovery method,the company would recognize gross profit in 2016 of ________.

Under IFRS,if a firm cannot reliably estimate the outcome of a construction contract,it uses the zero-gross profit approach.

Refer to Craft Construction.Assume that Craft uses the completed-contract method for revenue recognition.Make the appropriate journal entries for 2016 and 2017 for Craft Company.

GAAP and IFRS both allow a company to report service revenue using the percentage of completion method.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, cost Allocation, and Derecognition

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

OL: Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

Filters