Exam 6: Revenue Recognition

Which of the following is NOT true with regard to the expected value approach to measuring earnings?

Use the following information for the following questions: On April 1, Heavy Metal Corp. consigned 50 handcrafted benches to Disco Co. Heavy Metal’s cost was $ 350 per bench. Total freight costs were $ 700, which were paid by Disco. On August 1, Heavy Metal received a cheque for $ 14,100 from Disco which included the following information: Number of units sold:..............................20 Expenses deducted: Freight:.......................................................... $\$ 700$ Commission (20\% of sales price)...............? Advertising.................................................. $\$ 450$ Delivery....................................................... $\$ 290$ -The inventory of benches will be reported on whose statement of financial position and at what amount?

Coquel Company has a non-cancellable contract to construct a bridge for an estimated cost of $ 1,950,000. The contract is to start in July 2020, and the bridge is to be completed in September 2022. The following data pertain to the construction period. Assume that progress billings are non-refundable. Costs to date Estimated costs to complete Progress billings during the year Cash collected during the year 2020 \ 360,000 1,260,000 305,00 280.000 2021 \ 900,000 380,000 765,000 760.000 2022 \ 390,000 - 1,200,000 2,000,000 Instructions a) Assuming that Coquel Company uses the completed-contract method prepare the appropriate journal entries. b) Assuming that Coquel Company uses the zero-profit method prepare the appropriate journal entries to recognize revenue over the life of the contract.

Terms negotiated by a party to the contract that are more favourable than normal are called

Use the following information to answers the following questions: During 2020, Bing Corp. started a construction job with a total contract price of $ 1,050,000. Bing has consistently used the completed contract method. The job was completed on December 15, 2021. Additional data are as follows: Actual costs incurred Estimated remaining costs Billings to date Collections to date \ 405,000 405,000 360,000 200,000 \ 457,500 - 690,000 480,000 -For 2021, what amount should Bing recognize as gross profit?

On January 1, 2020, Reggae Ltd. sold land that cost $ 180,000 for $ 240,000, receiving a note bearing interest at 10 percent. The note will be paid in three annual instalments of $ 96,510 starting December 31, 2020. Assuming that collection of the note is very uncertain, how much revenue from this sale should Reggae recognize in 2020?

Under a consignment sales arrangement, revenue is recognized under the earnings approach

Control of an asset normally coincides with

If an entity sells on credit, the risk that the customer will not pay is called

Revenue recognition process Assume that Bombardier Inc. signs a contract to sell light-rail-transit (LRT) vehicles to the Region of Waterloo for $ 15 million. Instructions Using this transaction as an example, illustrate the five steps in the revenue recognition process for Bombardier.

Use the following information for the following questions: Hemsworth Ltd. began work in 2020 on a contract for $ 960,000. Other details follow: $\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad\quad \underline{2020}\quad \quad\quad \quad\underline{2021}$ $\text{Costs incurred during the year}\ldots \ldots \ldots \ldots \ldots \ldots \ldots\ldots \ldots \ldots \ldots \ldots \ldots \ldots\$160,000\quad \quad\$490,000$ $\text{Estimated costs to complete as of December 31}\ldots \ldots \ldots \ldots \ldots \ldots \ldots\ldots \ldots480,000\quad \quad0$ $\text{Billings during the year }\ldots\ldots \ldots \ldots \ldots\ldots\ldots \ldots \ldots \ldots\ldots \ldots \ldots \ldots \ldots \ldots \ldots 180,000\quad \quad720,000$ $\text{Collections during the year}\ldots\ldots \ldots \ldots \ldots\ldots\ldots \ldots \ldots \ldots\ldots \ldots \ldots \ldots \ldots \ldots 150,000\quad \quad975,000$ -Assume that Hemsworth uses the percentage-of-completion method of accounting. The portion of the total gross profit to be recognized in 2020 is

Under IFRS, where a right to return exists,

Use the following information for the following questions: On April 1, Heavy Metal Corp. consigned 50 handcrafted benches to Disco Co. Heavy Metal’s cost was $ 350 per bench. Total freight costs were $ 700, which were paid by Disco. On August 1, Heavy Metal received a cheque for $ 14,100 from Disco which included the following information: Number of units sold:..............................20 Expenses deducted: Freight:.......................................................... $\$ 700$ Commission (20\% of sales price)...............? Advertising.................................................. $\$ 450$ Delivery....................................................... $\$ 290$ -Under the earnings approach, total sales were

1. A contract that is no longer ______ profitable to the company. 2. An entity may have an implicit obligation ______ even if it is not explicitly noted in the sales contract. 3. Sales that are comprised of ______ several individual components. 4. The party acting as an agent for ______ the seller. 5. The method to allocate sales prices ______ to individual components of a sales bundle where the fair value of the undelivered item is subtracted from the overall purchase price. 6. The method used to account for ______ long-term contracts that do not recognize profits before the completion of the project. 7. The account used in the percentage-of ______ completion and completed-contract methods to accumulate costs and recognize profits. 8. Cash or other assets an entity ______ receives in return for the provision of goods or services. 9. The actions a company takes to ______ add value.

In 2020, Pop Construction Corp. began work on a contract for $ 3,700,000. Other details follow: Costs incurred during the year \1 ,800,000 Estimated costs to complete as of December 31 1,200,000 Billings during the year 1,650,000 Collections during the year 975,000 Pop uses the percentage-of-completion method. For calendar 2020, Pop should report gross profit of

When contract modification occurs, and the company determines a new contract and performance obligation has resulted,

On June 1, Freedom Distributions (FD) shipped 100 TVs to Universal TV (UTV) on consignment. FD buys these TVs from their supplier for $ 600 each and sells them to UTV for $ 800. UTV then retails them for $ 1,200 each. By the end of June, Universal TV reported that they had sold 60 of these TVs, and remitted the appropriate amount to FD. How much revenue should be recorded by FD in connection with this transaction?

Under the earnings approach, revenue from selling products is generally recognized

Haven Corp. contracted to construct a building for $ 750,000. Construction began in 2020 and was completed in 2021. Data relating to the contract follow: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Year ended $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ December 31 . Costs incurred. Estimated costs to complete \ 300,000 200,000 \ 230,000 - Haven uses the percentage-of-completion method. For the calendar years 2020 and 2021, respectively, Haven should report gross profit of

Where there are potentially multiple performance obligations within a single contract, if products or services are interdependent and interrelated, they must be