Exam 8: Revenue Recognition

Sonny's Dry Cleaners,Inc.charges an initial franchise fee of $195,000.When the agreement is signed,a payment of $75,000 is due,followed by four annual payments of $30,000 at the end of each period.Sonny's normal borrowing rate is 12%.Prepare the entries to record the initial franchise fee on the books of Sonny's under each of the following circumstances.

A company uses the percentage-of-completion method to account for a four-year construction contract.Progress billings sent in the second year that were collected in the third year would

Sunfish Construction Company uses the percentage-of-completion method of accounting.In 2014,Sunfish began work on a project which had a contract price of $1,600,000 and estimated costs of $1,200,000.Additional information is as follows: The amount of gross profit Sunfish should recognize on this contract during 2014 is

Samuels Company began operations on January 1,2014,and uses the installment sales method of accounting.The company has the following information available for 2014 and 2015: The realized gross profit for 2015 would be

Sonnet Construction Company uses the completed-contract method for long-term construction contracts.The information for a specific contract as of January 1,2014,is shown below. $600,000 of cost was incurred during 2014 and on December 31,2014,the estimated remaining cost to complete was still $800,000.The correct balance for the Construction in Progress at December 31,2014 is

In 2011,Huxley Corp.began construction work under a three-year contract.The contract price is $800,000.Huxley used the percentage-of-completion method for financial accounting purposes.The income to be recognized each year is based on the proportion of costs incurred to total estimated costs for completing the contract.The financial presentations relating to this contract at December 31,2014,appear below. How much cash was collected in 2014 on this contract?

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

A construction company uses the percentage-of-completion method for long-term construction contracts.A particular job was begun in 2014 and completed in 2015.During 2014,it appeared that the project would cost 25 percent more than originally expected.Data at the end of each year are given below: The contract price was $700,000.Assuming the company properly recorded income in 2013,how much income should be recorded in 2014?

For a construction firm using the completed-contract method,if costs exceed billings on some contracts by $1,000,000 and billings exceed costs by $800,000 on others,the contracts should ordinarily be reported as a

Steinman Construction Company uses the percentage-of-completion method for long-term construction contracts.The company has a project with a contract price of $7,000 on which $600 of gross profit has been recognized in prior years.Information for the current year is as follows: What is the loss that Steinman should recognize in the current year?

Astor Construction Company uses the percentage-of-completion method for long-term construction contracts.A specific job was begun in 2014 and completed in 2016.The contract price was $1,400,000 and cost information as of each year-end is given below: Assuming Astor correctly recorded gross profit in 2014,how much gross profit should the company record in 2015?

Sailor Construction Company has consistently used the percentage-of- completion method.On January 10,2014,Sailor began work on a $3,000,000 construction contract.At the inception date,the estimated cost of construction was $2,250,000.The following data relate to the progress of the contract: How much gross profit should Sailor recognize for the year ended December 31,2015?

Baywatch Construction contracted to build a ship over a two year period.The contract price was $21,000,000 with an estimate total cost of $18,400,000.The following cost data relate to the construction period. Prepare the necessary journal entries for 2014,2015,and 2016 assuming Baywatch uses the percentage-of-completion method.

Which of the following types of service transactions is most likely to require the proportional performance method of revenue recognition based on the seller's direct costs to perform each act?

In accounting for sales on consignment,sales revenue and the related cost of goods sold should be recognized by the

Franchise fees are properly recognized as revenue

When Progress Billings are made by a contractor on a long-term contract,what account is credited?

A company providing maintenance services on equipment for a fixed periodic fee would recognize

On May 1,2014,Lavender Construction Company entered into a fixed-price contract to construct an apartment building for $3,000,000.Lavender appropriately accounts for this contract under the percentage-of-completion method.Information relating to the contract is as follows: What is the amount of contract costs incurred during the year ended December 31,2015?

The Albert Corporation sells merchandise on the installment basis,and the uncertainties of cash collection make the use of the installment sales method of accounting acceptable.The following data relate to two years of operations. Record the transactions related to installment sales for 2014 and 2015.