Question 1

The cumulative percentage of completion is found by dividing the total costs incurred to date by the estimated total cost of the project.

Accepted Answer

A) True 
 B)False

Question 2

IFRS requires disclosure or the amount of revenue earned from interest and dividends.

Accepted Answer

A) True 
 B)False

Question 3

According to the FASB,revenue is recognized when it is realized or realizable and has been earned.

Accepted Answer

A) True 
 B)False

Question 4

Refer to LaGrow Developers.Assume that LaGrow uses the installment sales method.The buyer defaulted on the note receivable after making the down payment.At the date of repossession,the land had a fair value of $5,000,000.What will be the gain or loss on repossession?

Accepted Answer

A) $0 gain or loss 
B) $1,000,000 loss 
C) $1,000,000 gain 
D) $2,000,000 gain 
A) $0 gain or loss 
B) $1,000,000 loss 
C) $1,000,000 gain 
D) $2,000,000 gain

Question 5

When using the percentage-of-completion method to account for a long-term contract,the percentage used to recognize gross profit in the first year is determined by dividing ________.

Accepted Answer

A) costs incurred in the first year by estimated total costs of the project 
B) costs incurred in the first year by estimated remaining costs of the project 
C) costs in the first year by contract price 
D) estimated total profit by contract price 
A) costs incurred in the first year by estimated total costs of the project 
B) costs incurred in the first year by estimated remaining costs of the project 
C) costs in the first year by contract price 
D) estimated total profit by contract price

Question 6

Refer to LaGrow Developers.Assuming that LaGrow uses the cost-recovery method,the company would recognize gross profit in 2018 of ________.

Accepted Answer

A) $0 
B) $1,500,000 
C) $2,400,000 
D) $2,500,000 
A) $0 
B) $1,500,000 
C) $2,400,000 
D) $2,500,000

Question 7

The right of return represents a separate performance obligation.

Accepted Answer

A) True 
 B)False

Question 8

Louise paints seascapes and landscapes.In 2017 she placed nine of her most prized paintings with the Wainwright Studio Gallery.The paintings each carried a price of $1,000,and Louise made a deal with the Gallery to pay them a 40% commission on all paintings sold.At the end of the year three paintings had been sold.How much revenue will Louise recognize on the consignment sales?

Accepted Answer

A) $3,000 
B) $1,800 
C) $1,200 
D) $0 
A) $3,000 
B) $1,800 
C) $1,200 
D) $0

Question 9

The two methods for recognizing revenue from long-term contracts are the percentage-of-completion method and the point-of-sale method.

Accepted Answer

A) True 
 B)False

Question 10

Refer to Tullis Construction.How should Tullis report Construction in Progress and Billings on Construction in Progress at the end of year 1 on the balance sheet assuming the use of the percentage-of-completion method?

Accepted Answer

A) asset of $0 
B) liability of $250,000 
C) asset of $3,000,000 
D) liability of $4,000,000 
A) asset of $0 
B) liability of $250,000 
C) asset of $3,000,000 
D) liability of $4,000,000

Question 11

Companies may use the completed-contract method only if the contract ________.

Accepted Answer

A) is for less than two years 
B) exceeds five years 
C) does not meet criteria for percentage-of-completion method 
D) does not meet criteria for installment sales method 
A) is for less than two years 
B) exceeds five years 
C) does not meet criteria for percentage-of-completion method 
D) does not meet criteria for installment sales method

Question 12

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

Accepted Answer

A) expenses in excess of revenues are recorded each year 
B) an equal amount of revenue and expense is recorded each year 
C) neither revenue nor expenses are reported 
D) expenses are recorded each year 
A) expenses in excess of revenues are recorded each year 
B) an equal amount of revenue and expense is recorded each year 
C) neither revenue nor expenses are reported 
D) expenses are recorded each year

Question 13

Refer to Camey Construction.What would be the journal entry in Year 1 to record revenue?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 14

It is sometimes necessary to recognize revenue before delivery to maintain the predictive value of financial information.

Accepted Answer

A) True 
 B)False

Question 15

Under the zero-gross profit approach,the firm only reports profit in the final year of the contract.

Accepted Answer

A) True 
 B)False

Question 16

Refer to LaGrow Developers.Assuming that LaGrow uses the installment sales method,the company would recognize gross profit in 2017 of ________.

Accepted Answer

A) $0 
B) $1,000,000 
C) $1,500,000 
D) $2,500,000 
A) $0 
B) $1,000,000 
C) $1,500,000 
D) $2,500,000

Question 17

Refer to Craft Construction.Assume Craft uses the percentage-of-completion 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 18

Refer to Tullis Construction.What would be the journal entry in Year 1 to record revenue?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 19

Under the completed-contract method,revenues are only reported in the last year.

Accepted Answer

A) True 
 B)False

Question 20

Over the life of an installment account receivable,the cost-recovery method and the installment sale method recognize the same amount of gross profit.

Accepted Answer

A) True 
 B)False

Exam 9: OL: Revenue Recognition

The cumulative percentage of completion is found by dividing the total costs incurred to date by the estimated total cost of the project.

IFRS requires disclosure or the amount of revenue earned from interest and dividends.

According to the FASB,revenue is recognized when it is realized or realizable and has been earned.

Refer to LaGrow Developers.Assume that LaGrow uses the installment sales method.The buyer defaulted on the note receivable after making the down payment.At the date of repossession,the land had a fair value of $5,000,000.What will be the gain or loss on repossession?

When using the percentage-of-completion method to account for a long-term contract,the percentage used to recognize gross profit in the first year is determined by dividing ________.

Refer to LaGrow Developers.Assuming that LaGrow uses the cost-recovery method,the company would recognize gross profit in 2018 of ________.

The right of return represents a separate performance obligation.

The two methods for recognizing revenue from long-term contracts are the percentage-of-completion method and the point-of-sale method.

Refer to Tullis Construction.How should Tullis report Construction in Progress and Billings on Construction in Progress at the end of year 1 on the balance sheet assuming the use of the percentage-of-completion method?

Companies may use the completed-contract method only if the contract ________.

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

Refer to Camey Construction.What would be the journal entry in Year 1 to record revenue?

It is sometimes necessary to recognize revenue before delivery to maintain the predictive value of financial information.

Under the zero-gross profit approach,the firm only reports profit in the final year of the contract.

Refer to LaGrow Developers.Assuming that LaGrow uses the installment sales method,the company would recognize gross profit in 2017 of ________.

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

Refer to Tullis Construction.What would be the journal entry in Year 1 to record revenue?

Under the completed-contract method,revenues are only reported in the last year.

Over the life of an installment account receivable,the cost-recovery method and the installment sale method recognize the same amount of gross profit.

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

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