Question 1

Companies may use the completed-contract method only if the contract ________.

Accepted Answer

A)  is for less than two years 
B)  exceeds five years 
C)  does not meet criteria for percentage-of-completion method 
D)  does not meet criteria for installment sales method 
A)  is for less than two years 
B)  exceeds five years 
C)  does not meet criteria for percentage-of-completion method 
D)  does not meet criteria for installment sales method

Question 2

On November 15, 2016, LaGrow Developers sold a parcel of land for $4,500,000. 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 2018 of ________. (Do not round intermediary calculations, and round your final answer to the nearest whole dollar.)

Accepted Answer

A)  $0 
B)  $3,500,000 
C)  $900,000 
D)  $200,000 
A)  $0 
B)  $3,500,000 
C)  $900,000 
D)  $200,000

Question 3

When GAAP is used, revenue is recognized under the completed-contract method ________.

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 4

Two methods used to account for revenue recognition for long term contracts are the percentage-of-completion method and the ________.

Accepted Answer

A)  installment sales method 
B)  cost recovery method 
C)  completed-contract method 
D)  sales method 
A)  installment sales method 
B)  cost recovery method 
C)  completed-contract method 
D)  sales method

Question 5

The completed-contract method recognizes gross profit over the life of the contract.

Accepted Answer

A) True 
 B)False

Question 6

It is sometimes necessary to recognize revenue before delivery to maintain the predictive value of financial information.

Accepted Answer

A) True 
 B)False

Question 7

When using the percentage-of-completion method to account for a long-term contract, the percentage used to recognize gross profit in the first year is determined by dividing ________.

Accepted Answer

A)  costs incurred in the first year by estimated total costs of the project 
B)  costs incurred in the first year by estimated remaining costs of the project 
C)  costs in the first year by contract price 
D)  estimated total profit by contract price 
A)  costs incurred in the first year by estimated total costs of the project 
B)  costs incurred in the first year by estimated remaining costs of the project 
C)  costs in the first year by contract price 
D)  estimated total profit by contract price

Question 8

Under the zero-gross profit approach, the firm only reports profit in the final year of the contract.

Accepted Answer

A) True 
 B)False

Question 9

Journal entries for the percentage-of-completion method are only made at the completion of the project.

Accepted Answer

A) True 
 B)False

Question 10

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 $700,000.
Required:
Prepare the journal entry to record the repossession.

Accepted Answer

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Companies may use the completed-contract method only if the contract ________.

When GAAP is used, revenue is recognized under the completed-contract method ________.

Two methods used to account for revenue recognition for long term contracts are the percentage-of-completion method and the ________.

The completed-contract method recognizes gross profit over the life of the contract.

It is sometimes necessary to recognize revenue before delivery to maintain the predictive value of financial information.

When using the percentage-of-completion method to account for a long-term contract, the percentage used to recognize gross profit in the first year is determined by dividing ________.

Under the zero-gross profit approach, the firm only reports profit in the final year of the contract.

Journal entries for the percentage-of-completion method are only made at the completion of the project.

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

Companies may use the completed-contract method only if the contract ________.

When GAAP is used, revenue is recognized under the completed-contract method ________.

Two methods used to account for revenue recognition for long term contracts are the percentage-of-completion method and the ________.

The completed-contract method recognizes gross profit over the life of the contract.

It is sometimes necessary to recognize revenue before delivery to maintain the predictive value of financial information.

When using the percentage-of-completion method to account for a long-term contract, the percentage used to recognize gross profit in the first year is determined by dividing ________.

Under the zero-gross profit approach, the firm only reports profit in the final year of the contract.

Journal entries for the percentage-of-completion method are only made at the completion of the project.

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