Exam 6: Revenue Recognition

When dealing with sales agreements, "acquired" means

The first step in the revenue recognition process under IFRS is

Percentage-of-completion and completed-contract methods On January 1, 2020, Falcon Construction Ltd. started a construction project for $ 4,500,000. Relevant data for 2020 and 2021 are as follows: Current year construction costs Estimated remaining costs to complete Current year billings Current year collections \ 3,300,000 600,000 3,100,000 3,000,000 620,000 -0- 1,400,000 1,500,000 Instructions Calculate the following amounts for each method:

Discounted transaction price Gabby Inc., is selling tickets to a conference. In addition, Gabby offers an online course. Online courses are often sold separately at a rate of $ 259 per course. Conference \ 60 Course Both \ 185 Total \3 09 \ 185 Instructions How should the discount be allocated to the elements of the revenue arrangement?

Manson Construction Corp. has consistently used the percentage-of-completion method. In 2020, Manson started work on a $ 10,500,000 construction contract that was completed in 2021. The following information was taken from Manson's 2020 accounting records: Billings to date..................................... $\$ 3,300,000$ Costs incurred....................................... $3,150,000$ Collections to date................................ $2,100,000$ Estimated costs to complete.................. $6,300,000$ Under the earnings approach, what amount of gross profit should Manson recognize in 2020 on this contract?

Use the following information for the following questions: Folk Construction Corp. began operations in 2020. Construction activity for 2020 is shown below. Folk uses the completed-contract method. 1 2 3 Contract \ 1,280,000 1,440,000 1,320,000 Billings Through \ 1,260,000 600,000 760,000 Collections Through Costs to \ 1,040,000 400,000 700,000 Estimated Costs to \ 860,000 328,000 900,000 - \ 752,000 480,000 -Which of the following should be shown on the income statement for 2020 related to Contract 1?

Use the following information for the following questions.: A product and service are bundled together and sold to customers for $ 450. The fair values of the product and service are $ 350 and $ 150 respectively. -At the time of contract signing,

All of the following are disadvantages of input measures in measuring progress toward completion of long-term contracts EXCEPT

Under the earnings approach, if a company sells its product but gives the buyer the right to return the product, revenue from the sales transaction should be recognized at the time of sale if

Completed-contract method Broncos Construction Ltd. reported the following construction activity in 2020, their first year of operations: X Y Z Total Contract \ 260,000 325,000 Billings through \ 170,000 130,000 Cash collections through \ 155,000 130,000 Costs Incurred through \ 182,000 100,000 Estimated Additional Costs to \ 63,000 247,000 Each of the above contracts is with a different customer, and any work remaining at December 31, 2020 is expected to be completed in 2021. Instructions Prepare a partial income statement and a partial statement of financial position to indicate how the above contract information would be reported. Broncos use the completed-contract method.

When a sale involves goods and services, the selling price should NOT be

Cost estimates at the end of the second year indicate a loss will result on completion of the entire contract. Which of the following statements is correct?

Revenue recognition process How would your answer to Exercise 6-92 change if Bombardier had also contracted to maintain the LRT vehicles for the Region of Waterloo?

Mobey Construction Corp. uses the percentage-of-completion method. In 2020, Mobey began work on a contract for $ 2,475,000 which was completed in 2021. Data on the costs are: $\quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \text{Year Ended December 31}$ $\quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \underline{2020} \quad \quad \quad \underline{2021}$ $\text {Costs incurred} \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \$877,500 \quad \$630,000$ $\text{Estimated costs to complete}\ldots \ldots \ldots \ldots \ldots \ldots \ldots 585,000 \quad\underline{-}$ For the calendar years 2020 and 2021, Mobey should recognize gross profit of $\quad \underline{2020}\quad \quad \quad \quad \underline{2021}$ a) $\$0 \quad \quad \quad \quad \$967,500$ b) $\$ 580,500 \quad \$ 387,000$ c) $\$ 607,500 \quad \$ 360,000$ d) $\$ 607,500 \quad \$ 967,500$

A contract liability is often referred to as

Use the following information for the following questions: Hemsworth Ltd. began work in 2020 on a contract for $ 960,000. Other details follow: $\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad\quad \underline{2020}\quad \quad\quad \quad\underline{2021}$ $\text{Costs incurred during the year}\ldots \ldots \ldots \ldots \ldots \ldots \ldots\ldots \ldots \ldots \ldots \ldots \ldots \ldots\$160,000\quad \quad\$490,000$ $\text{Estimated costs to complete as of December 31}\ldots \ldots \ldots \ldots \ldots \ldots \ldots\ldots \ldots480,000\quad \quad0$ $\text{Billings during the year }\ldots\ldots \ldots \ldots \ldots\ldots\ldots \ldots \ldots \ldots\ldots \ldots \ldots \ldots \ldots \ldots \ldots 180,000\quad \quad720,000$ $\text{Collections during the year}\ldots\ldots \ldots \ldots \ldots\ldots\ldots \ldots \ldots \ldots\ldots \ldots \ldots \ldots \ldots \ldots 150,000\quad \quad975,000$ -Classical Ltd. Began work in 2020 on a contract for $ 1,250,000. Other data are: $\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad\quad \quad \quad\quad \quad\quad \quad\quad\quad \quad\quad \underline{2020}\quad \quad\quad \quad\underline{2021}$ $\text { Costs incurred to date }\ldots \ldots \ldots \ldots\ldots \ldots \ldots \ldots\ldots \ldots \ldots \ldots\ldots \ldots \$540,000\quad\quad \$335,000$ $\text { Estimated costs to complete as of December } \ldots \ldots \ldots \ldots \ldots \ldots360,000\quad\quad-$ $\text { 31 Billings to date}\ldots \ldots \ldots \ldots\ldots \ldots \ldots \ldots\ldots \ldots \ldots \ldots\ldots \ldots \ldots \ldots420,000\quad\quad 1,250,000$ $\text { Collections to date} \ldots \ldots \ldots\ldots\ldots\ldots \ldots \ldots \ldots\ldots \ldots \ldots \ldots\ldots \ldots \ldots 300,000\quad\quad1,000,000$ If Classical uses the percentage-of-completion method, the gross profit to be recognized in 2020 is

Use the following information for the following questions: Folk Construction Corp. began operations in 2020. Construction activity for 2020 is shown below. Folk uses the completed-contract method. 1 2 3 Contract \ 1,280,000 1,440,000 1,320,000 Billings Through \ 1,260,000 600,000 760,000 Collections Through Costs to \ 1,040,000 400,000 700,000 Estimated Costs to \ 860,000 328,000 900,000 - \ 752,000 480,000 -Which of the following should be shown on the statement of financial position at December 31, 2020 related to Contract 2?

Use the following information for the following questions: Folk Construction Corp. began operations in 2020. Construction activity for 2020 is shown below. Folk uses the completed-contract method. 1 2 3 Contract \ 1,280,000 1,440,000 1,320,000 Billings Through \ 1,260,000 600,000 760,000 Collections Through Costs to \ 1,040,000 400,000 700,000 Estimated Costs to \ 860,000 328,000 900,000 - \ 752,000 480,000 -Which of the following should be shown on the statement of financial position at December 31, 2020 related to Contract 3?

Constructive obligation Picot Ltd. Sells goods with $ 200 with a standard return policy. The policy states customers may return goods within 30 days of purchase if defective. This policy is stated on the bill and contract; however, Picot advertises that it stands by its products 100%. In the past, they have been known to accept returns beyond the 30 day return policy. Sally made her purchase from Picot 45 days ago and now wishes to return it. Instructions Discuss whether Picot has an obligation to accept Sally's return. Explain your answer.

Consignment sales On July 2, Cardinal Corp. ships merchandise costing $ 460,000 on consignment to Dolphin Stores. Cardinal pays the freight of $ 10,000. Upon sale, Dolphin Stores will receive a 12% commission and a 6% allowance to offset its advertising expenses. At the end of the month, Dolphin notifies Cardinal that 50% of the merchandise has been sold for $ 560,000. Instructions Record the journal entries required by the two companies to account for this consignment.