Exam 8: Revenue Recognition

In 2014,Amsterdam Builders began construction work under a three-year contract at a price of $7,525,000.The firm uses the percentage-of-completion method for financial accounting purposes.The income to be recognized each year is based on the proportion of cost incurred to the total estimated costs for completing the contract.The financial statement presentations relating to this contract on December 31,2014,are: Determine the

When a contractor determines that a contract will result in an overall loss,when should that loss be recognized within the completed-contract and percentage-of-completion methods? Completed-Contract Percentage-of-Completion

Golden Construction Company uses the percentage-of-completion method for long-term construction contracts.The company started a project with a contract price of $2,750 in 2014.Given the following data,what is the balance in Construction in Progress for this contract at the end of 2014?

Johann Builders has a fixed -price contract providing $120,000 of revenue.Construction on the contract was begun in 2013 and was completed in 2014.Information relating to the contract is as follows: What amount of income should Johann recognize in 2014 assuming that the company appropriately uses the percentage-of-completion method of income recognition?

The Yoder Supply Company sells maintenance contracts to the purchasers of the equipment they sell.The cost of the contract is $1,450,payable at the signing of the contract.The contract covers a three-year period with regularly scheduled inspection visits (every six months)plus any emergency visits.Experience shows that,on the average,one emergency visit per contract is required each year.Assume that 2,200 contracts were sold in 2014 and that contract sales were made evenly over the year. Give the entries required for 2014 and 2015 to account for the 2,200 contracts.

The completed-contract method of accounting for long-term construction-type contracts is preferable when

The installment method of recognizing revenue

F & R Construction,Inc.has consistently used the percentage-of-completion method of recognizing revenue.Last year F & R started work on a $5,000,000 construction contract,which was completed this year.The accounting records disclosed the following data for last year: How much revenue should F & R have recognized on this contract last year?

If the completed-contract method is used,what is the basis for determining the income to be recognized in the second year of a three-year contract?

Gunner Construction,Inc.has consistently used the percentage-of-completion method of recognizing revenue.During 2014,Gunner started work on a $2,500,000 fixed-price construction contract.The accounting records disclosed the following data for the year ended December 31,2014: How much loss should Gunner have recognized in 2014?

Which of the following would be used in the calculation of the gross profit recognized in the third and final year of a construction contract that is accounted for using the percentage-of-completion method? Actual Income Contract Total Previously Price Costs Recognized

Builder Construction Company's projects extend over several years and collection of receivables is reasonably certain.Each project has a contract that specifies a price and the rights and obligations of all parties.Both the contractor and the customer are expected to fulfill their contractual obligations on each project.Reliable estimates can be made of the extent of progress and cost to complete each project.The method that the company should use to account for construction revenue is

On November 30,Monet Company consigned 90 freezers to Vangogh Company for sale at $1,600 each and paid $1,200 in transportation costs.A report of sales was received on December 30 from Vangogh reporting the sale of 20 freezers,together with a remittance of the $27,200 balance due.The remittance was net of the agreed 15% commission.How much,and in what month,should Monet recognize as consignment sales revenue? November December

Which of the following is NOT an element identified by the AICPA as being necessary in order to use percentage-of-completion accounting?

Lennor Company sold inventory to Myers Incorporated and recorded the sale as revenue.Part of the agreement of the sale is that Lennor will repurchase the merchandise at a specified price over a specified period of time.Meanwhile,Myers uses the inventory purchased from Lennor as collateral for a loan.Myers uses the proceeds from the loan to pay Lennor for the inventory purchased.Lennor ultimately repurchases the inventory from Myers.Myers then uses the proceeds of the repayment to pay its loan obligation. Required:

The following data relate to a construction job started by Harrington Co.during 2014: -See Harrington Co.information above.Under the completed-contract method,how much should Harrington recognize as gross profit for 2014?

In 2014,Charlotte Engineering entered into an agreement to construct an office building at a contract price of $5,100,000.Construction data were as follows: Prepare the necessary entries for each year,assuming the firm uses the:

On January 1,2014,Artigas,Inc.obtained a contract to construct a building.It was estimated at the beginning of the contract that it would take 3 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. )

Assume the Abokair Corporation sold $30,000 worth of merchandise on the installment basis.The cost of the merchandise was $24,000,and collectibility of the receivable is uncertain.Collection in the current year on the account is $8,000.How much gross profit should be reported as realized?

An adjusting entry in which revenue is recognized and a receivable is established indicates that revenue has been Earned Collected