Question 1

Under what conditions must a company use the completed-contract method?

Accepted Answer

There are three conditions under which t

Question 2

On November 15, 2016, LaGrow Developers sold a parcel of land for $4,000,000. They had originally paid $3,600,000 for the land. The terms of the sale called for a $1,000,000 down payment, and the balance in two equal installments payable on November 15, 2017 and November 15, 2018. Disregard interest charges. LaGrow has a December 31 year-end. Refer to LaGrow Developers. Assuming that LaGrow uses the cost-recovery method, the company would recognize gross profit in 2016 of ________.

Accepted Answer

A)  $0 
B)  $400,000 
C)  $3,000,000 
D)  $1,000,000 
A)  $0 
B)  $400,000 
C)  $3,000,000 
D)  $1,000,000

Question 3

The percentage-of-completion method violates the general rule for revenue recognition that the earnings process is complete.

Accepted Answer

A) True 
 B)False

Question 4

What are the disclosure requirements under United States GAAP for long-term contracts?

Accepted Answer

1. Percentage-of-completion method-Metho

Question 5

On November 15, 2016, LaGrow Developers sold a parcel of land for $5,000,000. They had originally paid $3,600,000 for the land. The terms of the sale called for a $1,000,000 down payment, and the balance in two equal installments payable on November 15, 2017 and November 15, 2018. Disregard interest charges. LaGrow has a December 31 year-end. Refer to LaGrow Developers. Assume that LaGrow uses the installment sales method. The buyer defaulted on the note receivable after making the down payment. At the date of repossession, the land had a fair value of $4,000,000. What will be the gain or loss on repossession?

Accepted Answer

A)  $0 loss or gain 
B)  $1,000,000 loss 
C)  $1,000,000 gain 
D)  2,000,000 gain 
A)  $0 loss or gain 
B)  $1,000,000 loss 
C)  $1,000,000 gain 
D)  2,000,000 gain

Question 6

The cumulative percentage of completion is found by dividing the total costs incurred to date by the estimated total cost of the project.

Accepted Answer

A) True 
 B)False

Question 7

A consignment sale is an example of a principal-agent arrangement.

Accepted Answer

A) True 
 B)False

Question 8

Installment receivables may be reported on the balance sheet net of deferred gross profit.

Accepted Answer

A) True 
 B)False

Question 9

Thompson Industries
Thompson Industries is a real estate developer that sells plots of land. On January 1 of the current year, the company sold a plot of land for $1,200,000. The land cost Thompson $780,000. Terms of the sale required a down payment of $300,000 and installments of $300,000 on January 1 of the next three years.
-Refer to Thompson Industries. Assume that Thompson Industries uses the cost-recovery method. Prepare all journal entries related to the sale of land, the collection of cash, and the recognition of gross profit.

Accepted Answer

\[\begin{array}{l}
\text { Year } 1\
\b

Question 10

Camey Construction enters into a long-term fixed price contract to build an office building for $6,000,000. In the first year of the contract Camey incurs $1,300,000 of cost and the engineers determined that the remaining costs to complete are $2,400,000. Camey billed $1,700,000 and collected $1,000,000 in Year 1. Refer to Camey Construction. What would be the journal entry in Year 1 to record revenue? (Do not round intermediary calculations, and round your final answer to the nearest whole dollar.)

Accepted Answer

A)  $\begin{array}{lrr}
  \text {Accounts Receivable  } &1,700,000\
 \text { Revenue for Long-Term Contracts } &&1,700,000\
\end{array}$ 
B)  $$\begin{array} { l r r } 
\text { Cost of Construction } & 1,300,000 \
\text { Construction in Progress } & 808,108 & \
\quad \text { Revenue for Long-Term Contracts } && 2,108,108
\end{array}$$ 
C)  $$\begin{array} { l r r } 
\text { Cost of Construction } & 1,300,000 & \
\text { Construction in Progress } & 400,000 & \
\quad \text { Revenue for Long-Term Contracts } && 1,700,000
\end{array}$$ 
D)  $$\begin{array} { l l l } 
\text { Cost of Construction } & 1,300,000 \
\text { Construction in Progress } & 1,000,000 & \
\quad \text { Revenue for Long-Term Contracts } & & 2,300,000
\end{array}$$ 
A)  $\begin{array}{lrr}
  \text {Accounts Receivable  } &1,700,000\
 \text { Revenue for Long-Term Contracts } &&1,700,000\
\end{array}$ 
B)  $$\begin{array} { l r r } 
\text { Cost of Construction } & 1,300,000 \
\text { Construction in Progress } & 808,108 & \
\quad \text { Revenue for Long-Term Contracts } && 2,108,108
\end{array}$$ 
C)  $$\begin{array} { l r r } 
\text { Cost of Construction } & 1,300,000 & \
\text { Construction in Progress } & 400,000 & \
\quad \text { Revenue for Long-Term Contracts } && 1,700,000
\end{array}$$ 
D)  $$\begin{array} { l l l } 
\text { Cost of Construction } & 1,300,000 \
\text { Construction in Progress } & 1,000,000 & \
\quad \text { Revenue for Long-Term Contracts } & & 2,300,000
\end{array}$$

Question 11

Tullis Construction enters into a long-term fixed price contract to build an office tower for $11,000,000. In the first year of the contract. Tullis incurs $3,000,000 of cost and the engineers determined that the remaining costs to complete are $5,000,000. Tullis billed $3,700,000 in year 1 and collected $3,200,000 by the end of the end of the year. Refer to Tullis Corporation. How much gross profit should Tullis recognize in Year 1 assuming the use of the completed-contract method?

Accepted Answer

A)  $0 
B)  $2,300,000 
C)  $3,000,000 
D)  $8,000,000 
A)  $0 
B)  $2,300,000 
C)  $3,000,000 
D)  $8,000,000

Question 12

When using the IFRS zero-gross profit approach, revenue is recognized ________.

Accepted Answer

A)  each year of the contract 
B)  only the first year of the contract 
C)  only the last year of the contract 
D)  only when there is a loss on the contract 
A)  each year of the contract 
B)  only the first year of the contract 
C)  only the last year of the contract 
D)  only when there is a loss on the contract

Question 13

On November 15, 2016, LaGrow Developers sold a parcel of land for $4,000,000. They had originally paid $3,000,000 for the land. The terms of the sale called for a $2,000,000 down payment, and the balance in two equal installments payable on November 15, 2017 and November 15, 2018. Disregard interest charges. LaGrow has a December 31 year-end. Refer to LaGrow Developers. Assuming that LaGrow uses the installment sales method, in its December 31, 2016 balance sheet, the company would report ________. (Do not round intermediary calculations, and round your final answer to the nearest whole dollar.)

Accepted Answer

A)  $1,500,000 net installment account receivable 
B)  $1,000,000 net installment account receivable 
C)  $4,000,000 net installment account receivable 
D)  $2,000,000 net installment account receivable 
A)  $1,500,000 net installment account receivable 
B)  $1,000,000 net installment account receivable 
C)  $4,000,000 net installment account receivable 
D)  $2,000,000 net installment account receivable

Question 14

Revenue recognition deals with the issues of timing and measurement.

Accepted Answer

A) True 
 B)False

Question 15

What conditions are necessary for a company to use the percentage-of-completion method?

Accepted Answer

The percentage-of-completion method spec

Question 16

Tullis Construction enters into a long-term fixed price contract to build an office tower for $22,000,000. In the first year of the contract, Tullis incurs $9,000,000 of cost and the engineers determined that the remaining costs to complete are $5,000,000. Tullis billed $11,000,000 in year 1 and collected $4,100,000 by the end of the end of the year. Refer to Tullis Construction. How much should Tullis report as Accounts Receivable at the end of year 1 on the balance sheet assuming the use of the percentage-of-completion method? (Do not round intermediary calculations, and round your final answer to the nearest whole dollar.)

Accepted Answer

A)  $6,900,000 
B)  $3,700,000 
C)  $4,100,000 
D)  $20,000,000 
A)  $6,900,000 
B)  $3,700,000 
C)  $4,100,000 
D)  $20,000,000

Question 17

Tullis Construction enters into a long-term fixed price contract to build an office tower for $15,000,000. In the first year of the contract. Tullis incurs $3,000,000 of cost and the engineers determined that the remaining costs to complete are $5,000,000. Tullis billed $3,800,000 in year 1 and collected $3,300,000 by the end of the end of the year. Refer to Tullis Corporation. How should Tullis report Construction in Progress and Billings on Construction in Progress at the end of year 1 on the balance sheet assuming the use of the completed-contract method?

Accepted Answer

A)  liability of $800,000 
B)  asset of $800,000 
C)  asset of $500,000 
D)  liability of $500,000 
A)  liability of $800,000 
B)  asset of $800,000 
C)  asset of $500,000 
D)  liability of $500,000

Question 18

Gleason Construction enters into a long-term fixed price contract to build an office building for $26,000,000. In the first year of the contract, Gleason incurs $6,000,000 of cost and the engineers determined that the remaining costs to complete are $14,000,000. How much revenue should Gleason recognize in Year 1 assuming the use of the zero-gross -profit approach?

Accepted Answer

A)  $6,000,000 
B)  $26,000,000 
C)  $0 
D)  $14,000,000 
A)  $6,000,000 
B)  $26,000,000 
C)  $0 
D)  $14,000,000

Question 19

Which of the following is not a major condition for revenue recognition under IFRS?

Accepted Answer

A)  Persuasive evidence of an arrangement. 
B)  Risks and rewards have transferred to the buyer. 
C)  Revenues and costs can be reliably measured. 
D)  Probable that economic benefits will flow to the seller. 
A)  Persuasive evidence of an arrangement. 
B)  Risks and rewards have transferred to the buyer. 
C)  Revenues and costs can be reliably measured. 
D)  Probable that economic benefits will flow to the seller.

Question 20

Deferred gross profit may be treated either as a contra-asset or a liability.

Accepted Answer

A) True 
 B)False

Under what conditions must a company use the completed-contract method?

The percentage-of-completion method violates the general rule for revenue recognition that the earnings process is complete.

What are the disclosure requirements under United States GAAP for long-term contracts?

The cumulative percentage of completion is found by dividing the total costs incurred to date by the estimated total cost of the project.

A consignment sale is an example of a principal-agent arrangement.

Installment receivables may be reported on the balance sheet net of deferred gross profit.

When using the IFRS zero-gross profit approach, revenue is recognized ________.

Revenue recognition deals with the issues of timing and measurement.

What conditions are necessary for a company to use the percentage-of-completion method?

Which of the following is not a major condition for revenue recognition under IFRS?

Deferred gross profit may be treated either as a contra-asset or a liability.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

Filters

Exam 8: Extenssion: Ol Revenue Recognition Previous Standard

Under what conditions must a company use the completed-contract method?

The percentage-of-completion method violates the general rule for revenue recognition that the earnings process is complete.

What are the disclosure requirements under United States GAAP for long-term contracts?

The cumulative percentage of completion is found by dividing the total costs incurred to date by the estimated total cost of the project.

A consignment sale is an example of a principal-agent arrangement.

Installment receivables may be reported on the balance sheet net of deferred gross profit.

When using the IFRS zero-gross profit approach, revenue is recognized ________.

Revenue recognition deals with the issues of timing and measurement.

What conditions are necessary for a company to use the percentage-of-completion method?

Which of the following is not a major condition for revenue recognition under IFRS?

Deferred gross profit may be treated either as a contra-asset or a liability.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

Filters