Question 1

Under GAAP, when a company uses the completed-contract method of accounting, ________.

Accepted Answer

A)  estimated losses are recognized in full prior to completion of the contract 
B)  estimated losses are recognized ratably based upon the degree of contract completion 
C)  neither profits nor losses are recognized until the contract is completed 
D)  expenses are recorded each period, but revenue is not recognized until the contract is completed 
A)  estimated losses are recognized in full prior to completion of the contract 
B)  estimated losses are recognized ratably based upon the degree of contract completion 
C)  neither profits nor losses are recognized until the contract is completed 
D)  expenses are recorded each period, but revenue is not recognized until the contract is completed

Question 2

A company that collects revenues in advance over an extended time period should disclose all the following information except ________.

Accepted Answer

A)  unearned revenue 
B)  amount of revenue recognized in earnings 
C)  amount of cash received from customers 
D)  estimated uncollectible revenues 
A)  unearned revenue 
B)  amount of revenue recognized in earnings 
C)  amount of cash received from customers 
D)  estimated uncollectible revenues

Question 3

The total profit recognized on a contract using the completed-contract method is different than the total profit recognized under the percentage-of-completion method.

Accepted Answer

A) True 
 B)False

Question 4

Craft Construction
Craft Construction entered into a contract to construct a generator station for a utility customer. The project was started in 2016 and completed in 2017. Cost and other information is presented below.
 $\begin{array}{lrc}
&2016&2017\
\text { Costs incurred during the year } & \$ 225,000 & \$ 550,000 \
\text { Estimated costs to complete } & 450,000 & -0 \text { - } \
\text { Billings during the year } & 200,000 & 700,000 \
\text { Cash collections during the year } & 150,000 & 750,000
\end{array}$

-Refer to Craft Construction. Assume Craft uses the percentage-of-completion method for revenue recognition. Prepare all journal entries to record costs, billings, collections and profit recognition.

Accepted Answer

The answer of Craft Construction
Craft Construction entered into a contract...

Question 5

Charleston Yacht Club sells annual passes to its facilities. An annual pass costs $8,000 and is good for year-round use. On January 1, the company sells 90 passes and collects the cash. The entry on March 31 to record revenue is ________. (Do not round intermediary calculations, and round your final answer to the nearest whole dollar.)

Accepted Answer

A)  $\begin{array}{lrr}
  \text {Cash  } &\$180,000\
 \text {  Unearned Revenue} &&\$180,000\
\end{array}$ 
B)  $\begin{array}{lrr}
  \text { Cash } &\$180,000\
 \text { Revenue } &&\$180,000\
\end{array}$ 
C)  $\begin{array}{lrr}
  \text { Unearned Revenue } &\$180,000\
 \text {  Revenue } &&\$180,000\
\end{array}$ 
D)  $\begin{array}{lrr}
  \text { Revenue  } &\$180,000\
 \text {  Unearned Revenue} &&\$180,000\
\end{array}$ 
A)  $\begin{array}{lrr}
  \text {Cash  } &\$180,000\
 \text {  Unearned Revenue} &&\$180,000\
\end{array}$ 
B)  $\begin{array}{lrr}
  \text { Cash } &\$180,000\
 \text { Revenue } &&\$180,000\
\end{array}$ 
C)  $\begin{array}{lrr}
  \text { Unearned Revenue } &\$180,000\
 \text {  Revenue } &&\$180,000\
\end{array}$ 
D)  $\begin{array}{lrr}
  \text { Revenue  } &\$180,000\
 \text {  Unearned Revenue} &&\$180,000\
\end{array}$

Question 6

According to the FASB, when a seller has collected cash, the earnings process is virtually complete.

Accepted Answer

A) True 
 B)False

Question 7

When a firm delivers merchandise to a buyer, it has met both criteria for revenue recognition.

Accepted Answer

A) True 
 B)False

Question 8

The percentage-of-completion method and completed-contract method are interchangeable alternatives for revenue recognition.

Accepted Answer

A) True 
 B)False

Question 9

On November 15, 2016, LaGrow Developers sold a parcel of land for $9,000,000. 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, 2017 balance sheet, the company would report ________. (Do not round intermediary calculations, and round your final answer to the nearest whole dollar.)

Accepted Answer

A)  $3,000,000 net installment accounts receivable 
B)  $1,166,667 net installment accounts receivable 
C)  $3,500,000 net installment accounts receivable 
D)  $7,000,000 net installment accounts receivable 
A)  $3,000,000 net installment accounts receivable 
B)  $1,166,667 net installment accounts receivable 
C)  $3,500,000 net installment accounts receivable 
D)  $7,000,000 net installment accounts receivable

Question 10

Camey Construction enters into a long-term fixed price contract to build an office building for $8,000,000. In the first year of the contract Camey incurs $1,000,000 of cost and the engineers determined that the remaining costs to complete are $2,200,000. Camey billed $1,700,000 and collected $1,400,000 in Year 1. Refer to Camey Construction. How much gross profit should Camey recognize in Year 1 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)  $1,500,000 
B)  $531,250 
C)  $7,000,000 
D)  $8,000,000 
A)  $1,500,000 
B)  $531,250 
C)  $7,000,000 
D)  $8,000,000

Question 11

Gleason Construction enters into a long-term fixed price contract to build an office building for $27,000,000. In the first year of the contract Gleason incurs $8,000,000 of cost and the engineers determined that the remaining costs to complete are $25,000,000. How much gross profit or loss should Gleason recognize in Year 1 assuming the use of the completed-contract method?

Accepted Answer

A)  $6,000,000 loss 
B)  $6,000,000 profit 
C)  $0 
D)  $19,000,000 loss 
A)  $6,000,000 loss 
B)  $6,000,000 profit 
C)  $0 
D)  $19,000,000 loss

Question 12

When using the cost -recovery method, gross profit is not recognized until the full cost of the merchandise has been recovered.

Accepted Answer

A) True 
 B)False

Question 13

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 installment sales method. The buyer of the land defaulted on the sales agreement after making the down payment and the first installment. At the time of repossession, the land was worth $500,000.
Required:
Prepare the journal entry to record the repossession.

Accepted Answer

\[\begin{array} { l r l } 
\text { Defer

Question 14

The Construction in Progress account is what type of account?

Accepted Answer

A)  liability 
B)  revenue 
C)  asset 
D)  expense 
A)  liability 
B)  revenue 
C)  asset 
D)  expense

Question 15

Craft Construction
Craft Construction entered into a contract to construct a generator station for a utility customer. The project was started in 2016 and completed in 2017. Cost and other information is presented below.
 $$\begin{array} { l r c } 
& \underline { 2016 } & \underline { 2017 } \
\text { Costs incurred during the year } & \$ 225,000 & \$ 550,000 \
\text { Estimated costs to complete } & 450,000 & - 0 - \
\text { Billings during the year } & 200,000 & 700,000 \
\text { Cash collections during the year } & 150,000 & 750,000
\end{array}$$
-Refer to Craft Construction. Assume that Craft uses the completed-contract method for revenue recognition. Make the appropriate journal entries for 2016 and 2017 for Craft Company.

Accepted Answer

None

Question 16

The percentage-of-completion method may utilize a cost-to-cost approach or an output measure approach.

Accepted Answer

A) True 
 B)False

Question 17

List the five conditions specified by IFRS for revenue recognition from the sale of goods.

Accepted Answer

1. The seller has transferred the signif

Question 18

Louise paints seascapes and landscapes. In 2017 she placed nine of her most prized paintings with the Wainwright Studio Gallery. The paintings each carried a price of $1,000, and Louise made a deal with the Gallery to pay them a 40% commission on all paintings sold. At the end of the year three paintings had been sold. How much revenue will Louise recognize on the consignment sales?

Accepted Answer

A)  $3,000 
B)  $1,800 
C)  $1,200 
D)  $0 
A)  $3,000 
B)  $1,800 
C)  $1,200 
D)  $0

Question 19

It is necessary to compute a gross profit margin for installment sales for each year.

Accepted Answer

A) True 
 B)False

Question 20

Billings in excess of costs and profits are carried on the balance sheet as a(n) ________.

Accepted Answer

A)  asset 
B)  liability 
C)  equity 
D)  revenue 
A)  asset 
B)  liability 
C)  equity 
D)  revenue

Under GAAP, when a company uses the completed-contract method of accounting, ________.

A company that collects revenues in advance over an extended time period should disclose all the following information except ________.

The total profit recognized on a contract using the completed-contract method is different than the total profit recognized under the percentage-of-completion method.

According to the FASB, when a seller has collected cash, the earnings process is virtually complete.

When a firm delivers merchandise to a buyer, it has met both criteria for revenue recognition.

The percentage-of-completion method and completed-contract method are interchangeable alternatives for revenue recognition.

When using the cost -recovery method, gross profit is not recognized until the full cost of the merchandise has been recovered.

The Construction in Progress account is what type of account?

The percentage-of-completion method may utilize a cost-to-cost approach or an output measure approach.

List the five conditions specified by IFRS for revenue recognition from the sale of goods.

It is necessary to compute a gross profit margin for installment sales for each year.

Billings in excess of costs and profits are carried on the balance sheet as a(n) ________.

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 GAAP, when a company uses the completed-contract method of accounting, ________.

A company that collects revenues in advance over an extended time period should disclose all the following information except ________.

The total profit recognized on a contract using the completed-contract method is different than the total profit recognized under the percentage-of-completion method.

According to the FASB, when a seller has collected cash, the earnings process is virtually complete.

When a firm delivers merchandise to a buyer, it has met both criteria for revenue recognition.

The percentage-of-completion method and completed-contract method are interchangeable alternatives for revenue recognition.

When using the cost -recovery method, gross profit is not recognized until the full cost of the merchandise has been recovered.

The Construction in Progress account is what type of account?

The percentage-of-completion method may utilize a cost-to-cost approach or an output measure approach.

List the five conditions specified by IFRS for revenue recognition from the sale of goods.

It is necessary to compute a gross profit margin for installment sales for each year.

Billings in excess of costs and profits are carried on the balance sheet as a(n) ________.

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