Exam 13: Revenue and Expense Recognition: Additional Concepts

Use the information below to answer the following questions: Multi-Storey Builders Ltd had a large 3-year project with total revenue of $8 000 000 and estimated total costs of $6 500 000. The project was 20% complete at the end of the first year, 70% complete at the end of the second year, and 100% complete at the end of the third year. Revenues and costs were as estimated. -What profit was earned during the second year if the percentage of completion method was used?

Use the information below to answer the following questions: The profit for a particular project of Blue Fin Ltd, using the percentage of completion method, was $470 000 for year 1 and $690 000 for year 2 (completion). -What difference would there be to profit for year 1 if the completion of production method were used?

Use the information below to answer the following questions: The percentage of completion profit for a particular project of Redgate Ltd was $200 000 for year 1 and $220 000 for year 2 (completion). -What difference would there be in profit for year 1 if the completion of production method were used?

Use the information below to answer the following questions: Freda Ltd decided to change its accounting for long service leave in order to accrue expense sooner than had been done previously. The effect on provision for employee entitlements as at the end of 2011 was to increase it by $14 000. By the end of 2009, the liability would go up by $21 000. The company’s income tax rate is 35%. -What would be the effect of the change on 2012 cash flow from operations?

Use the information below to answer the following questions: Freda Ltd decided to change its accounting for long service leave in order to accrue expense sooner than had been done previously. The effect on provision for employee entitlements as at the end of 2011 was to increase it by $14 000. By the end of 2009, the liability would go up by $21 000. The company’s income tax rate is 35%. -What would be the effect of the change on 2011 net profit?

Opec Ltd manufactures crystal balls.Transactions for year ended 31 December 2012 were as follows: (i)18 000 units at a cost of $20 each were produced. (ii)14 000 units were sold at $30 each. (iii)Cash was collected on 10 000 of those units sold. What was the reported profit for the year 2009?

Which of the following statements about the concept of revenue is true?

Identify the point at which revenue would be recognised in each of the following questions: -At what point would you expect the builder of a football stadium to recognise revenue?

Use the information below to answer the following questions. Each question is to be considered separately. The income statement of Berrima Barbed Wire Ltd is: \ Revenue 22,000 Expense Profit before income tax 10,000 Income tax expense (30\%) Net profit -If the rate of income tax were raised to 40%,what would be the effect on net profit?

Use the information below to answer the following questions: On 1 January 2010, Romulus Ltd signed a contract worth $21 000 000 to construct a light rail from here to there. The light rail was to be built over 3 years, with progress payments of $7 000 000 to be made at the end of each year. Estimated costs were $15 000 000 and the following costs incurred and paid by Romulus Ltd were in accordance with estimates and represented the percentage completed in each year: \ 2010 \ 8000000 2011 \ 5000000 2012 \ 2000000 The project was completed in December 2012. -Using the completion of production method,what profit would Romulus Ltd report in 2012?

Identify the point at which revenue would be recognised in each of the following questions: -At what point would you expect revenue from sales of building materials to be recognised?

Use the information below to answer the following questions: On 1 January 2010, Peter Ltd signed a contract worth $64 000 000 to construct the Cycling Stadium. The stadium was to be built over three years, with progress payments as follows: \ 31 December 2010 \ 15000000 31 December 2011 \ 20000000 31 December 2012 \ 29000000 Estimated costs were $50 000 000. The project was 35% complete at the end of 2010, 75% complete at the end of 2011, and 100% complete at the end of 2012. Revenues and costs were as estimated. -What profit was earned during 2011 if the percentage of completion method was used?

Use the information below to answer the following questions: Multi-Storey Builders Ltd had a large 3-year project with total revenue of $8 000 000 and estimated total costs of $6 500 000. The project was 20% complete at the end of the first year, 70% complete at the end of the second year, and 100% complete at the end of the third year. Revenues and costs were as estimated. -What profit was earned during the second year if the completed contract method was used?

Revenue should be recognised when: (i)it can be reasonably measured in dollar terms (ii)cash,a promise of cash,or other asset,has been received (iii)most of the costs of generating the revenue have been incurred,and those remaining can be measured with reasonable accuracy.

Use the information below to answer the following questions: The percentage of completion profit for a particular project of Redgate Ltd was $200 000 for year 1 and $220 000 for year 2 (completion). -What difference would there be to the total profit for the two years if the completion of production method were used?

Identify the point at which revenue would be recognised in each of the following questions: -At what point would you expect the Red Cross to recognise revenue from donations? There are no special conditions attached to the donations.

Use the information below to answer the following questions: Leslie Ltd has found an error in its revenue account: an invoice for $3000 was recorded as revenue in 2011 when it should have been recorded in 2012. The company’s income tax rate is 40% and there was no corresponding error in cost of goods sold. -What is the effect of the error on 2012 net profit?

The most common critical event in the revenue generation sequence is:

Use the information below to answer the following questions: Leslie Ltd has found an error in its revenue account: an invoice for $3000 was recorded as revenue in 2011 when it should have been recorded in 2012. The company’s income tax rate is 40% and there was no corresponding error in cost of goods sold. -What is the effect of the error on 2011 cash from operations?

Use the information below to answer the following questions: On 1 January 2010, Romulus Ltd signed a contract worth $21 000 000 to construct a light rail from here to there. The light rail was to be built over 3 years, with progress payments of $7 000 000 to be made at the end of each year. Estimated costs were $15 000 000 and the following costs incurred and paid by Romulus Ltd were in accordance with estimates and represented the percentage completed in each year: \ 2010 \ 8000000 2011 \ 5000000 2012 \ 2000000 The project was completed in December 2012. -Using the percentage of completion method,what profit would Romulus Ltd report in 2011?