Exam 8: Revenue Recognition

The Yoder Supply Company sells maintenance contracts to the purchasers of the equipment they sell.The cost of the contract is $1,450,payable at the signing of the contract.The contract covers a three-year period with regularly scheduled inspection visits (every six months)plus any emergency visits.Experience shows that,on the average,one emergency visit per contract is required each year.Assume that 2,200 contracts were sold in 2014 and that contract sales were made evenly over the year. Give the entries required for 2014 and 2015 to account for the 2,200 contracts.

If a company uses the completed-contract method of accounting for long-term construction contracts,then during the period of construction,financial information related to a long-term contract will

Goods on consignment should be included in the inventory of

In accounting for a long-term construction contract for which there is a projected profit,the balance in the Construction in Progress account at the end of the first year of work using the percentage-of-completion method would be

The theoretical support for using the percentage-of-completion method of accounting for long-term construction projects is that it

When comparing the percentage-of-completion and completed-contract methods of accounting for long-term construction contracts,both methods will report the same

If the completed-contract method is used,what is the basis for determining the income to be recognized in the second year of a three-year contract?

On January 1,2014 Flora Enterprises obtained a contract to construct a building.It was estimated at the beginning of the contract that it would take three years to complete the project at an expected cost of $200,000.The contract price was $250,000.The following information describes the status of the job at the close of production each year: Compute the items listed below for each year assuming the use of the percentage-of-completion cost-to-cost method.(Round all percentages to two decimals).

In 2014,Amsterdam Builders began construction work under a three-year contract at a price of $7,525,000.The firm uses the percentage-of-completion method for financial accounting purposes.The income to be recognized each year is based on the proportion of cost incurred to the total estimated costs for completing the contract.The financial statement presentations relating to this contract on December 31,2014,are: Determine the (1)cash collected in 2014. (2)estimated income on the construction contract.