Exam 18: Income Recognition and Measurement of Net Assets

Which of the following situations would require the recognition of revenue to be deferred?

Exhibit 18-4 The following information is provided for Tampa Company: - Refer to Exhibit 18-4.How much deferred gross profit is still on the books at the end of 2011?

Under the completed-contract method of revenue recognition, the partial billings account is closed out against the

Exhibit 18-5 Morris Co.sold a franchise at an initial franchise fee of $5, 000.A down payment of $800 was received with the balance covered by the issuance of a $4, 200, 6% note, payable by the franchisee in four equal annual installments.The refund period has expired and the collectibility of the note is reasonably assured. - Refer to Exhibit 18-5.If all material services have not been substantially performed, which entry to record the franchise is correct?

When Partial Billings exceeds Construction in Progress, under the completed-contract method the two accounts are reported together on the balance sheet in the

Gainesville Gym sold 300 contracts at $230 each.Each contract permitted the buyer to use a tanning bed 12 times and a whirlpool 16 times.Cost information follows: Initial direct costs \ 1,000 Annual indirect costs 600 Direct cost per service use: Tanning bed 7 Whirlpool 3 In the first year, customers used the tanning bed 2, 160 times and the whirlpool 900 times. Required: Compute the amount of revenue that should be recognized in the first year.

The importance the economic substance of an event taking precedence over the legal form refers to revenue being

Specific industry guidance regarding revenue recognition is prevalent in GAAP IFRS I. Yes Yes II. Yes No III. No Yes IV. No No

Exhibit 18-3 On January 1, 2010, Dunedin Co.sold 100 contracts at $500 each.Each contract permitted the buyer to use a repair bay six times and a paint bay nine times. Additional information: Initial direct costs \ 5,000 Annual indirect costs 1,000 Direct cost per service act: Repair 30 Paint 20 In 2010, the repair bay was used 180 times and the paint bay was used 162 times. - Refer to Exhibit 18-3.How much revenue should be recognized by Dunedin in 2010?

Lake City, Inc.sold 800 contracts at $400 each.Each contract permitted the buyer to use a tin pincher 16 times and a glass finisher 20 times.Cost information follows: Initial direct costs \ 8,000 Annual indirect costs 5,000 Direct cost per service use: Tin pincher 4 Glass finisher 60 In the first year, the tin pincher was used 4, 500 times and the glass finisher was used 4, 800 times. Required: Fill in the lines below.

When merchandise previously sold under an installment contract is repossessed, it is recorded at

A company may recognize revenue in full at the time of a sale if

Exhibit 18-4 The following information is provided for Tampa Company: - Refer to Exhibit 18-4.How much gross profit did Tampa Company report in 2011?

In early 2010, the Miami Company signed a contract for construction of an industrial park to be completed in three years.At that time, estimated total costs were $2, 250, 000, and estimated total revenues were $4, 000, 000.During 2010, Miami incurred costs of $960, 000 and collected $1, 100, 000.In December 2010, Miami recalculated total costs for the project to be $3, 200, 000 while estimated total revenues remained unchanged.What amount of profit (loss)should be recognized by Miami for 2010, using the percentage-of-completion method?

Anticipated losses are recognized immediately under which of the following methods of recognizing revenue? Percentage of Completed Completion Contract I. Yes No II. No No III. Yes Yes IV No Yes

French Company sells its subsidiary, Spanish Company, to Italian, Inc.French has net assets of $50 million and Spanish has net assets of $5 million.The sales price is $2 million down and a 10% note for $4 million.Italian has the right to cancel over the next year and uses the deposit method.The proper accounting for this transaction by French Company is

If the consignment-in account has a credit balance, it is reported on the consignee's balance sheet as a(n)

IFRS and GAAP will sometimes differ in the method of revenue recognition applied to construction contracts.Three different methods are involved: percentage of completion, cost recovery, and completed contract.The fastest to slowest revenue recognition among the methods is

Exhibit 18-1 In 2010, Alpha Construction began work on a contract with a price of $850, 000 and estimated costs of $595, 000.Data for each year of the contract are as follows: 2010 2011 2012 Costs incurred chring the year \ 238,000 \ 319,600 \ 105,000 Estimated costs to complete 357,000 139,400 -0- Partial billings 260,000 210,000 380,000 Collections 240,000 200,000 410,000 -Refer to Exhibit 18-1.Under the percentage-of-completion method of revenue recognition, the net amount reported for construction in progress inventory at the end of 2011 would be

Inventory is reported at cost plus gross profit recognized to date under which of the following revenue recognition methods?