Question 1

Goods on consignment should be included in the inventory of

Accepted Answer

A)  the consignor but not the consignee. 
B)  both the consignor and the consignee. 
C)  the consignee but not the consignor. 
D)  neither the consignor nor the consignee. 
A)  the consignor but not the consignee. 
B)  both the consignor and the consignee. 
C)  the consignee but not the consignor. 
D)  neither the consignor nor the consignee.

Question 2

Which of the following best describes the condition(s)that must be present for the recognition of revenue?

Accepted Answer

A)  The revenue must be earned,measurable,and collected. 
B)  The revenue must be earned and collectible. 
C)  The revenue must be earned,measurable,and collectible. 
D)  The revenue must be measurable and collectible. 
A)  The revenue must be earned,measurable,and collected. 
B)  The revenue must be earned and collectible. 
C)  The revenue must be earned,measurable,and collectible. 
D)  The revenue must be measurable and collectible.

Question 3

Carson Distributing,which began operating on January 1,appropriately uses the installment method of accounting.The following information pertains to Carson's operations for the first year:   The balance in the deferred gross profit account at December 31 should be

Accepted Answer

A)  $400,000. 
B)  $320,000. 
C)  $240,000. 
D)  $200,000. 
A)  $400,000. 
B)  $320,000. 
C)  $240,000. 
D)  $200,000.

Question 4

Chantal Company began operations on January 2,2014,and appropriately used the installment sales method of accounting.The following data are available for 2014 and 2015:   The realized gross profit for 2015 is

Accepted Answer

A)  $1,440,000. 
B)  $1,040,000. 
C)  $920,000. 
D)  $780,000. 
A)  $1,440,000. 
B)  $1,040,000. 
C)  $920,000. 
D)  $780,000.

Question 5

Cantor Company sold $400,000 to customers on account during 2014,and collected $200,000 during the year.The company properly uses the installment sales method of revenue recognition due to the uncertainty of collection of these installment receivables.The company has determined that cost of sales for the $400,000 of sales was $340,000. What is the correct balance of the company's Deferred Gross Profit account at the end of 2014,after the recognition of revenue for that year?

Accepted Answer

A)  $0 
B)  $30,000 
C)  $60,000 
D)  $140,000 
A)  $0 
B)  $30,000 
C)  $60,000 
D)  $140,000

Question 6

Under which of the following circumstances is the installment sales method appropriate for the recognition of revenue in the income statement?

Accepted Answer

A)  For any sales where collection is spread over a reasonable long period of time. 
B)  In any situation where management wishes to delay the recognition of revenue in order to smooth its income. 
C)  For sales where collection is spread over a reasonable long period of time and significant doubt exists about the ultimate collection of the receivables. 
D)  For sales where collection is spread over a reasonable long period of time and no significant doubt exists concerning ultimate collection of the receivables. 
A)  For any sales where collection is spread over a reasonable long period of time. 
B)  In any situation where management wishes to delay the recognition of revenue in order to smooth its income. 
C)  For sales where collection is spread over a reasonable long period of time and significant doubt exists about the ultimate collection of the receivables. 
D)  For sales where collection is spread over a reasonable long period of time and no significant doubt exists concerning ultimate collection of the receivables.

Question 7

On January 3,2014,Continental Services,Inc. ,signed an agreement authorizing Peen Company to operate as a franchisee over a 20-year period for an initial franchise fee of $200,000 received when the agreement was signed.Peen commenced operations on July 1,2014,at which date all of the initial services required of Continental had been performed.The agreement also provides that Peen must pay a continuing franchise fee equal to 6% of the revenue from the franchise annually to Continental.Peen's franchise revenue for 2014 was $900,000.For the year ended December 31,2014,how much should Continental record as revenue from franchise fees from the Peen franchise?

Accepted Answer

A)  $100,000 
B)  $106,000 
C)  $254,000 
D)  $266,000 
A)  $100,000 
B)  $106,000 
C)  $254,000 
D)  $266,000

Question 8

If the percentage-of-completion method is used,what is the basis for determining the gross profit to be recognized in the second year of a three-year contract?

Accepted Answer

A)  Cumulative actual costs and estimated costs to complete 
B)  Incremental cost for the second year only 
C)  Cumulative actual costs incurred only 
D)  No gross profit would be recognized in year 2 
A)  Cumulative actual costs and estimated costs to complete 
B)  Incremental cost for the second year only 
C)  Cumulative actual costs incurred only 
D)  No gross profit would be recognized in year 2

Question 9

Marshland,Inc.had the following consignment transactions during December:   No sales of consigned goods were made through December 31.Marshland's December 31 balance sheet should include consigned inventory at

Accepted Answer

A)  $18,900. 
B)  $18,000. 
C)  $12,500. 
D)  $12,000. 
A)  $18,900. 
B)  $18,000. 
C)  $12,500. 
D)  $12,000.

Question 10

Antoine Construction Company has consistently used the percentage-of completion method of recognizing income.During 2014,Antoine entered into a fixed-price contract to construct an office building for $10,000,000.Information relating to the contract is as follows:   Contract costs incurred during 2015 were

Accepted Answer

A)  $3,200,000. 
B)  $3,300,000. 
C)  $3,500,000. 
D)  $4,800,000. 
A)  $3,200,000. 
B)  $3,300,000. 
C)  $3,500,000. 
D)  $4,800,000.

Question 11

Which of the following is NOT a difference between the percentage-of completion and completed-contract methods of accounting for long-term construction contracts?

Accepted Answer

A)  They report different amounts for inventory during the construction period. 
B)  They report different amounts for progress billings during the construction period. 
C)  They cause a different cash inflow during the construction period. 
D)  They report different amounts for accounts receivable during the construction period. 
A)  They report different amounts for inventory during the construction period. 
B)  They report different amounts for progress billings during the construction period. 
C)  They cause a different cash inflow during the construction period. 
D)  They report different amounts for accounts receivable during the construction period.

Question 12

Tundra Electronics Company sends appliances to dealers on a consignment basis.The selling price per unit is $920 and the dealer earns a 30% commission.The manufacturing cost of the appliance to Tundra Electronics is $570.Assume that in 2014,800 units were sent on consignment to Farber Hardware.Four hundred of these units were sold for cash,and by December 31,2011,remittance had been made to Tundra Electronics for 380 units.
Prepare the required journal entries on the books of Tundra Electronics Company and Farber Hardware for the transactions in 2014.

Accepted Answer

The answer of Tundra Electronics Company sends appliances to dealers...

Question 13

Warthog Enterprises,which began operations on January 1,appropriately uses the installment method of accounting.The following information is available for its first year:   What is the total amount of Warthog's installment sales for the first year?

Accepted Answer

A)  $300,000 
B)  $345,000 
C)  $425,000 
D)  $525,000 
A)  $300,000 
B)  $345,000 
C)  $425,000 
D)  $525,000

Question 14

When using the installment sales method,

Accepted Answer

A)  total revenues and costs are recognized at the point of sale,but gross profit is deferred in proportion to the cash that is uncollected from the sale. 
B)  gross profit is recognized only after the amount of cash collected exceeds the cost of the item sold. 
C)  revenue,costs,and gross profit are recognized proportionally as the cash is received from the sale of product. 
D)  gross profit is deferred until all cash is received,but revenues and costs are recognized in proportion to the cash collected from the sale. 
A)  total revenues and costs are recognized at the point of sale,but gross profit is deferred in proportion to the cash that is uncollected from the sale. 
B)  gross profit is recognized only after the amount of cash collected exceeds the cost of the item sold. 
C)  revenue,costs,and gross profit are recognized proportionally as the cash is received from the sale of product. 
D)  gross profit is deferred until all cash is received,but revenues and costs are recognized in proportion to the cash collected from the sale.

Question 15

The Alliance Corporation introduced a new line of product the profitability of which is quite uncertain.This uncertainty has resulted in Alliance choosing to use the cost recovery method to account for this product.
The following information relating to the new product line is available for the year 2014:
   Required:

Accepted Answer

The answer of The Alliance Corporation introduced a new line...

Question 16

How should the balances of Progress Billings and Construction in Progress be shown at reporting dates prior to the completion of a long-term contract?

Accepted Answer

A)  Progress Billings as income,Construction in Progress as inventory 
B)  Net,as income from construction if credit balance,and loss from construction if debit balance 
C)  Progress Billings as deferred income,Construction in Progress as a current asset 
D)  Net,as a current asset if debit balance and current liability if credit balance 
A)  Progress Billings as income,Construction in Progress as inventory 
B)  Net,as income from construction if credit balance,and loss from construction if debit balance 
C)  Progress Billings as deferred income,Construction in Progress as a current asset 
D)  Net,as a current asset if debit balance and current liability if credit balance

Question 17

The cost recovery method is

Accepted Answer

A)  used only when circumstances surrounding a sale are so uncertain that earlier recognition is impossible. 
B)  the most common method of accounting for real estate sales. 
C)  similar to percentage-of-completion accounting. 
D)  never acceptable under generally accepted accounting principles. 
A)  used only when circumstances surrounding a sale are so uncertain that earlier recognition is impossible. 
B)  the most common method of accounting for real estate sales. 
C)  similar to percentage-of-completion accounting. 
D)  never acceptable under generally accepted accounting principles.

Question 18

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).

Accepted Answer

The answer of On January 1,2014 Flora Enterprises obtained a...

Question 19

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

Accepted Answer

A)  is more conservative than the completed-contract method. 
B)  produces a realistic matching of expenses with revenues. 
C)  more closely conforms to the cost principle. 
D)  reports a lower Net Income figure than the completed-contract method. 
A)  is more conservative than the completed-contract method. 
B)  produces a realistic matching of expenses with revenues. 
C)  more closely conforms to the cost principle. 
D)  reports a lower Net Income figure than the completed-contract method.

Question 20

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

Accepted Answer

A)  appear on both the income statement and balance sheet during the construction period. 
B)  appear only on the income statement during the period of construction. 
C)  appear only on the balance sheet during the period of construction. 
D)  not appear on the financial statements. 
A)  appear on both the income statement and balance sheet during the construction period. 
B)  appear only on the income statement during the period of construction. 
C)  appear only on the balance sheet during the period of construction. 
D)  not appear on the financial statements.

Goods on consignment should be included in the inventory of

Which of the following best describes the condition(s)that must be present for the recognition of revenue?

Carson Distributing,which began operating on January 1,appropriately uses the installment method of accounting.The following information pertains to Carson's operations for the first year: The balance in the deferred gross profit account at December 31 should be

Chantal Company began operations on January 2,2014,and appropriately used the installment sales method of accounting.The following data are available for 2014 and 2015: The realized gross profit for 2015 is

Under which of the following circumstances is the installment sales method appropriate for the recognition of revenue in the income statement?

If the percentage-of-completion method is used,what is the basis for determining the gross profit to be recognized in the second year of a three-year contract?

Marshland,Inc.had the following consignment transactions during December: No sales of consigned goods were made through December 31.Marshland's December 31 balance sheet should include consigned inventory at

Which of the following is NOT a difference between the percentage-of completion and completed-contract methods of accounting for long-term construction contracts?

Warthog Enterprises,which began operations on January 1,appropriately uses the installment method of accounting.The following information is available for its first year: What is the total amount of Warthog's installment sales for the first year?

When using the installment sales method,

How should the balances of Progress Billings and Construction in Progress be shown at reporting dates prior to the completion of a long-term contract?

The cost recovery method is

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

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

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, pensions, Other Compissues

Earnings Per Share

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters

Exam 8: Revenue Recognition

Goods on consignment should be included in the inventory of

Which of the following best describes the condition(s)that must be present for the recognition of revenue?

Carson Distributing,which began operating on January 1,appropriately uses the installment method of accounting.The following information pertains to Carson's operations for the first year: The balance in the deferred gross profit account at December 31 should be

Chantal Company began operations on January 2,2014,and appropriately used the installment sales method of accounting.The following data are available for 2014 and 2015: The realized gross profit for 2015 is

Under which of the following circumstances is the installment sales method appropriate for the recognition of revenue in the income statement?

If the percentage-of-completion method is used,what is the basis for determining the gross profit to be recognized in the second year of a three-year contract?

Marshland,Inc.had the following consignment transactions during December: No sales of consigned goods were made through December 31.Marshland's December 31 balance sheet should include consigned inventory at

Which of the following is NOT a difference between the percentage-of completion and completed-contract methods of accounting for long-term construction contracts?

Warthog Enterprises,which began operations on January 1,appropriately uses the installment method of accounting.The following information is available for its first year: What is the total amount of Warthog's installment sales for the first year?

When using the installment sales method,

How should the balances of Progress Billings and Construction in Progress be shown at reporting dates prior to the completion of a long-term contract?

The cost recovery method is

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

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

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, pensions, Other Compissues

Earnings Per Share

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters