Pool Contractors (PC)entered into a contract to build a solar heated swimming complex for $1,800,000. Construction commenced on July 1, 2020, with a planned completion date of December 31, 2022. A summary of the related accounting information is provided below: \[\begin{array} { | l | r | r | r | } \hline & \mathbf { 2 0 2 0 } & \mathbf { 2 0 2 1 } & \mathbf { 2 0 2 2 } \\ \hline \text { Costs incurred during the year } & 400,000 & 500,000 & 650,000 \\ \hline \text { Estimated costs to complete at year end } & 1,200,000 & 600,000 & 0 \\ \hline \text { Billings during the year } & 560,000 & 640,000 & 600,000 \\ \hline \text { Cash collections during the year } & 500,000 & 310,000 & 990,000 \\ \hline \end{array}\] How much gross profit would be recognized in fiscal 2021 if PC uses the percentage of completion method?

A) $50,000 B) $100,000 C) $130,000 D) $180,000 A) $50,000 B) $100,000 C) $130,000 D) $180,000

Nichols Construction Company (NCC)entered into a contract to build a shopping complex for $1,900,000. Construction commenced on July 1, 2020, with a planned completion date of December 31, 2022. A summary of the related accounting information is provided below: \[\begin{array} { | l | r | r | r | } \hline & \mathbf { 2 0 2 0 } & \mathbf { 2 0 2 1 } & \mathbf { 2 0 2 2 } \\ \hline \text { Costs incurred during the year } & 400,000 & 500,000 & 650,000 \\ \hline \text { Estimated costs to complete at year end } & 1,200,000 & 600,000 & 0 \\ \hline \text { Billings during the year } & 560,000 & 640,000 & 600,000 \\ \hline \text { Cash collections during the year } & 500,000 & 310,000 & 990,000 \\ \hline \end{array}\] How much would the balance in accounts receivable be on the balance sheet of NCC at the end of 2021 if NCC uses the percentage of completion method?

A) $130,000 B) $390,000 C) $790,000 D) $1,100,000 A) $130,000 B) $390,000 C) $790,000 D) $1,100,000

Harris Corporation sold hardware and software for $70,000 cash. In addition, the company will provide support on the software for 1 year and maintenance on the hardware for 3 years. The observable stand-alone selling prices are as follows: \[\begin{array} { | l | l | } \hline \text { Hardware } & \$ 60,070 \\ \hline \text { Software } & \$ 8,900 \\ \hline \text { Hardware Maintenance } & \$ 4,000 \\ \hline \end{array}\] a. Determine how revenue should be allocated to the various components in this transaction. b. Apply the appropriate revenue recognition criteria to determine when revenue should be recognized for the various components of this transaction.

a. The relative stand-alone selling pric

Nichols Construction Company (NCC)entered into a contract to build a shopping complex for $1,900,000. Construction commenced on July 1, 2020, with a planned completion date of December 31, 2022. A summary of the related accounting information is provided below: \[\begin{array} { | l | r | r | r | } \hline & \mathbf { 2 0 2 0 } & \mathbf { 2 0 2 1 } & \mathbf { 2 0 2 2 } \\ \hline \text { Costs incurred during the year } & 400,000 & 500,000 & 650,000 \\ \hline \text { Estimated costs to complete at year end } & 1,200,000 & 600,000 & 0 \\ \hline \text { Billings during the year } & 660,000 & 440,000 & 800,000 \\ \hline \text { Cash collections during the year } & 500,000 & 310,000 & 800,000 \\ \hline \end{array}\] How much would the balance in accounts receivable be on the balance sheet of NCC at the end of 2022 if NCC uses the percentage of completion method?

A) $0 B) $250,000 C) $290,000 D) $800,000 A) $0 B) $250,000 C) $290,000 D) $800,000

Hedley Corporation sold hardware and software for $70,000 cash. In addition, the company will provide support on the software for 1 year and maintenance on the hardware for 3 years. The observable stand-alone selling prices are as follows: \[\begin{array} { | l | l | } \hline \text { Hardware } & \$ 60,000 \\ \hline \text { Software } & \$ 15,000 \\ \hline \text { Hardware Maintenance } & \$ 5,000 \\ \hline \end{array}\] a. Determine how revenue should be allocated to the various components in this transaction. b. Apply the appropriate revenue recognition criteria to determine when revenue should be recognized for the various components of this transaction.

a. The relative stand-alone selling pric

Exam 4: Revenue and Recognition

RU FIT Centre opened for business on April 5, 2021. For revenue recognition purposes, all memberships are assumed to be issued at the beginning of the month, with 1-year memberships costing $600 and 2-year memberships costing $960. During April, 32 1-year memberships and 25 2-year memberships were sold. RU FIT Centre prepares monthly financial statements. Which of the following statements is correct?

(Multiple Choice)

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Question 61

What disclosures are required under IFRS for construction contracts?

(Multiple Choice)

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Question 62

Which of the following methods of revenue recognition would be selected when a vendor has another firm acting as its selling agent?

(Multiple Choice)

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Question 63

Pool Contractors (PC)entered into a contract to build a solar heated swimming complex for $1,800,000. Construction commenced on July 1, 2020, with a planned completion date of December 31, 2022. A summary of the related accounting information is provided below: Costs incurred during the year 400,000 500,000 650,000 Estimated costs to complete at year end 1,200,000 600,000 0 Billings during the year 560,000 640,000 600,000 Cash collections during the year 500,000 310,000 990,000 How much gross profit would be recognized in fiscal 2021 if PC uses the percentage of completion method?

(Multiple Choice)

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Question 64

Philips Corp. is unsure how to record the following transactions: •$60,000 of goods shipped F.O.B shipping point on December 28, 2021. •$50,000 of goods shipped F.O.B. destination point on December 31, 2021. What amount of sales related to these two transactions should Philips Corp. record in fiscal 2021?

(Multiple Choice)

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Question 65

Sunshine Contractors started a contract in January 2020 to build a bridge at a fixed price of $14 million. The bridge was to be completed by October 2022 Total cumulative costs incurred by the end of December 2020 and 2021 were $2 million and $6 million, respectively. Sunshine is unable to estimate the total costs of the project prior to completion. Final costs at the end of the project totaled $11 million. How much cost of sales will Sunshine report in 2022?

(Multiple Choice)

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Question 66

Nichols Construction Company (NCC)entered into a contract to build a shopping complex for $1,900,000. Construction commenced on July 1, 2020, with a planned completion date of December 31, 2022. A summary of the related accounting information is provided below: Costs incurred during the year 400,000 500,000 650,000 Estimated costs to complete at year end 1,200,000 600,000 0 Billings during the year 560,000 640,000 600,000 Cash collections during the year 500,000 310,000 990,000 How much would the balance in accounts receivable be on the balance sheet of NCC at the end of 2021 if NCC uses the percentage of completion method?

(Multiple Choice)

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Question 67

Explain how the transaction price should be allocated to the performance obligations in a multiple performance obligation sales arrangement.

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Question 68

On December 1, 2021, SuperTech sold 100 locks for laptop computers at $50 each with a 90-day unconditional right of return. Since this is a new product for SuperTech, it has no past history regarding estimated returns. Which of the following is TRUE regarding SuperTech's December 31, 2021 financial statements?

(Multiple Choice)

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Question 69

Through non-subscription sales, TV Weekly provides retailers with a 50% margin (or 100% mark up)on its magazines. The newsstand price is $8 per issue. During 2021, the company distributed 1,654,000 copies to retailers, not all of which were sold. Retailers sent a total of 390,000 unsold copies back to the publisher, of which 30,000 copies were for last two issues published in 2020. In January 2022, the company received 27,000 unsold copies for magazines published in the last weeks of December 2021. Required: Determine the amount of revenue from non-subscriptions TV Weekly should recognize in 2021.

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Question 70

Which statement is correct about multiple performance obligation arrangements?

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Question 71

Lagory Co. started a contract in June 2020 to build a bridge at a fixed price of $14 million. The bridge was to be completed by October 2022. Total cumulative costs incurred by the end of December 2020 and 2021 were $2 million and $6 million, respectively. Lagory Co. is unable to estimate the total costs of the project prior to completion. Final costs at the end of the project totalled $11 million. How much revenue will Lagory Co. report in 2021?

(Multiple Choice)

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Question 72

What are three exceptions to the use of the percentage of completion method for construction contracts?

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Question 73

Harris Corporation sold hardware and software for $70,000 cash. In addition, the company will provide support on the software for 1 year and maintenance on the hardware for 3 years. The observable stand-alone selling prices are as follows: Hardware \ 60,070 Software \ 8,900 Hardware Maintenance \ 4,000 a. Determine how revenue should be allocated to the various components in this transaction. b. Apply the appropriate revenue recognition criteria to determine when revenue should be recognized for the various components of this transaction.

(Essay)

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Question 74

Destiny Apartments Inc. (DA Inc.)is building a luxury condominium for a contract price of $68,000,000. This is estimated to be a three-year project with an estimated cost of $54,000,000. DA Inc. uses the percentage of completion method of revenue recognition, using the cost-to-cost method of estimating the percentage complete. The following is the best available information at the end of each year: Year 1 Year 2 Year 3 Costs incurred each year 9,000 31,500 20,000 Estimated costs to complete 51,000 27,000 0 Gillings 13,000 29,500 25,500 Collections 9,000 26,500 32,500 Required: a. Explain how the percentage completion method reduced information asymmetry and guards against moral hazard. b. Compute the amount of gross profit to be recognized in Year 1, Year 2, and Year 3. Show computations in tabular form provided below: Year 1 Year 2 Year3 Cost incurred to date Estimated cost to complete Estimated total cost Contract price Estirated Erass prafit Giamplete Gras prafit to date Current efit previngrafit c. Complete the PARTIAL Balance Sheet for Year 2. Current assets $Destiny Apartments Inc. (DA Inc.)is building a luxury condominium for a contract price of $68,000,000. This is estimated to be a three-year project with an estimated cost of $54,000,000. DA Inc. uses the percentage of completion method of revenue recognition, using the cost-to-cost method of estimating the percentage complete. The following is the best available information at the end of each year: \begin{array} { | l | l | l | l | } \hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } \\ \hline \text { Costs incurred each year } & 9,000 & 31,500 & 20,000 \\ \hline \text { Estimated costs to complete } & 51,000 & 27,000 & 0 \\ \hline \text { Gillings } & 13,000 & 29,500 & 25,500 \\ \hline \text { Collections } & 9,000 & 26,500 & 32,500 \\ \hline \end{array} Required: a. Explain how the percentage completion method reduced information asymmetry and guards against moral hazard. b. Compute the amount of gross profit to be recognized in Year 1, Year 2, and Year 3. Show computations in tabular form provided below: \begin{array} { | l | l | l | l | } \hline & \text { Year 1 } & \text { Year 2 } & \text { Year3 } \\ \hline \text { Cost incurred to date } & & & \\ \hline \text { Estimated cost to complete } & & & \\ \hline \text { Estimated total cost } & & & \\ \hline \text { Contract price } & & & \\ \hline \text { Estirated Erass prafit } & & & \\ \hline \text { Giamplete } & & & \\ \hline \text { Gras prafit to date } & & & \\ \hline \text { Current efit previngrafit } & & & \\ \hline \end{array} c. Complete the PARTIAL Balance Sheet for Year 2. Current assets Current Liabilities$ Current Liabilities $Destiny Apartments Inc. (DA Inc.)is building a luxury condominium for a contract price of $68,000,000. This is estimated to be a three-year project with an estimated cost of $54,000,000. DA Inc. uses the percentage of completion method of revenue recognition, using the cost-to-cost method of estimating the percentage complete. The following is the best available information at the end of each year: \begin{array} { | l | l | l | l | } \hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } \\ \hline \text { Costs incurred each year } & 9,000 & 31,500 & 20,000 \\ \hline \text { Estimated costs to complete } & 51,000 & 27,000 & 0 \\ \hline \text { Gillings } & 13,000 & 29,500 & 25,500 \\ \hline \text { Collections } & 9,000 & 26,500 & 32,500 \\ \hline \end{array} Required: a. Explain how the percentage completion method reduced information asymmetry and guards against moral hazard. b. Compute the amount of gross profit to be recognized in Year 1, Year 2, and Year 3. Show computations in tabular form provided below: \begin{array} { | l | l | l | l | } \hline & \text { Year 1 } & \text { Year 2 } & \text { Year3 } \\ \hline \text { Cost incurred to date } & & & \\ \hline \text { Estimated cost to complete } & & & \\ \hline \text { Estimated total cost } & & & \\ \hline \text { Contract price } & & & \\ \hline \text { Estirated Erass prafit } & & & \\ \hline \text { Giamplete } & & & \\ \hline \text { Gras prafit to date } & & & \\ \hline \text { Current efit previngrafit } & & & \\ \hline \end{array} c. Complete the PARTIAL Balance Sheet for Year 2. Current assets Current Liabilities$ $Destiny Apartments Inc. (DA Inc.)is building a luxury condominium for a contract price of $68,000,000. This is estimated to be a three-year project with an estimated cost of $54,000,000. DA Inc. uses the percentage of completion method of revenue recognition, using the cost-to-cost method of estimating the percentage complete. The following is the best available information at the end of each year: \begin{array} { | l | l | l | l | } \hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } \\ \hline \text { Costs incurred each year } & 9,000 & 31,500 & 20,000 \\ \hline \text { Estimated costs to complete } & 51,000 & 27,000 & 0 \\ \hline \text { Gillings } & 13,000 & 29,500 & 25,500 \\ \hline \text { Collections } & 9,000 & 26,500 & 32,500 \\ \hline \end{array} Required: a. Explain how the percentage completion method reduced information asymmetry and guards against moral hazard. b. Compute the amount of gross profit to be recognized in Year 1, Year 2, and Year 3. Show computations in tabular form provided below: \begin{array} { | l | l | l | l | } \hline & \text { Year 1 } & \text { Year 2 } & \text { Year3 } \\ \hline \text { Cost incurred to date } & & & \\ \hline \text { Estimated cost to complete } & & & \\ \hline \text { Estimated total cost } & & & \\ \hline \text { Contract price } & & & \\ \hline \text { Estirated Erass prafit } & & & \\ \hline \text { Giamplete } & & & \\ \hline \text { Gras prafit to date } & & & \\ \hline \text { Current efit previngrafit } & & & \\ \hline \end{array} c. Complete the PARTIAL Balance Sheet for Year 2. Current assets Current Liabilities$

(Essay)

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Question 75

Nichols Construction Company (NCC)entered into a contract to build a shopping complex for $1,900,000. Construction commenced on July 1, 2020, with a planned completion date of December 31, 2022. A summary of the related accounting information is provided below: Costs incurred during the year 400,000 500,000 650,000 Estimated costs to complete at year end 1,200,000 600,000 0 Billings during the year 660,000 440,000 800,000 Cash collections during the year 500,000 310,000 800,000 How much would the balance in accounts receivable be on the balance sheet of NCC at the end of 2022 if NCC uses the percentage of completion method?

(Multiple Choice)

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Question 76

In the chart below, identify the expense recognition method that you feel is most appropriate and also explain why. Transaction Expense recognition method Why? A. A company purchases computers for its marketing department. B. A company purchases manufacturing equipment that is expected to produce 25,000 units. C. A company incurs delivery costs on January 2 for a shipment of products sold seven days earlier (before the year-end).

(Essay)

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Question 77

Simply Manufacturers has signed an order to supply 10,000 chairs at a price to be determined sixty days after delivery. Payment is due at that time. The price per chair may range from $0 to $100 depending on a series of events, the outcome of which cannot be accurately predicted. Which of the following factors is most likely to precludes Simply from recognizing revenue at time of delivery.

(Multiple Choice)

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Question 78

Which statement is correct about multiple performance obligation arrangements?

(Multiple Choice)

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Question 79

Hedley Corporation sold hardware and software for $70,000 cash. In addition, the company will provide support on the software for 1 year and maintenance on the hardware for 3 years. The observable stand-alone selling prices are as follows: Hardware \ 60,000 Software \ 15,000 Hardware Maintenance \ 5,000 a. Determine how revenue should be allocated to the various components in this transaction. b. Apply the appropriate revenue recognition criteria to determine when revenue should be recognized for the various components of this transaction.

(Essay)

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Question 80

Showing 61 - 80 of 105

What disclosures are required under IFRS for construction contracts?

Which of the following methods of revenue recognition would be selected when a vendor has another firm acting as its selling agent?

Explain how the transaction price should be allocated to the performance obligations in a multiple performance obligation sales arrangement.

Which statement is correct about multiple performance obligation arrangements?

What are three exceptions to the use of the percentage of completion method for construction contracts?

Which statement is correct about multiple performance obligation arrangements?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Accrual Accounting

Cash and Receivables

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Financial Assets

Property, Plant and Equipment

Intangible Assets, Goodwill, Mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

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