Exam 3: Additional Topics in Income Determination

The sale is itself the sole criterion for recognizing revenue.

All of the following are examples of long-term construction projects except

Because a farmer's expenditures for seed,fertilizer and fuel yield uncertain future benefits (similar to expenditures on research and development),such expenditures are expensed as incurred.

The key issue in franchise fee accounting centers on when and how much of the initial franchise fee should be recognized up front as revenue by the franchisor.

The Sarver Farm has completed the fall harvest with 50,000 bushels of premium wheat. The wheat cost $75,000 from planting to harvest and the market price of the wheat on the day it is placed in the silo is $2.50 per bushel. Sarver sells 42,000 bushels in Year 1 and holds the remaining 8,000 until Year 2 when it sells for $3.00 per bushel. -Using the market price (production)method,how much net income should Sarver recognize in Year 2?

Ford Appliance Center records revenue on the installment sales method. The following information is available for the first two years of business. Year 1 Year 2 Sales \ \ 2 Cost of goods sold 140,000 162,500 Cash collections: Year 1 sales 100,000 80,000 Year 2 sales 130,000 -How much realized gross profit on installment sales will Ford recognize in Year 2?

Noah Construction Company is building a large complex for a contract price of $5,000,000. This is a three-year project estimated to cost $4,000,000 and the following information is available: (\ in thousands) Year 1 Year 2 Year 3 Costs incurred \ 1,000 \ 1,500 \ 1,250 Estimated completion costs \ 3,000 \ 1,500 \ 10 Billings \ 750 \ 1,750 \ 2,500 Cash collected \ 500 \ 1,500 \ 3,000 -Using the percentage-of-completion method of revenue recognition,how much income is recognized in Year 3?

GAAP requires that the interest component of the periodic cash flows from installment sales be recorded separately.