Exam 13: Revenue and Expense Recognition: Additional Concepts

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 2010?

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 the total profit for 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 revenue from sales of software by a computer store 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?

Revenue should not be recognised unless:

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 cash from operations?

Use the information below to answer the following questions: Highrise Constructions Ltd had a large 3-year project with total revenue of $5,000,000 and estimated total costs of $4 200,,000. The project was 25% complete at the end of the first year, 55% 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 third year if the completion of production method was used?

Which of the following transactions should not result in revenue recognition in March?

When services are provided,it is customary to recognise revenue when the:

Which of the following statements about the critical event in the revenue-generation sequence is true?

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 third year if the percentage of completion method was used?

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. -Assuming that the dividend is unchanged,what is the effect of the error on retained profits at end of 2012?

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 2012 if the percentage of completion method was used?

Use the information below to answer the following questions: Holidays Ltd manufactures caravans. Transactions for the year ended 30 June 2012 were as follows: (i) 1200 caravans were manufactured at a cost of $15 000 each. (ii) 1000 caravans were sold for $20 000 each. (iii) Cash was collected on 950 of the caravans sold. -What was the reported profit for the year ended 30 June 2012 if revenue was recognised at the point of sale?

Highrise Constructions Ltd had a large 3-year project with total revenue of $5 000 000 and estimated total costs of $4 200 000. The project was 25% complete at the end of the first year, 55% 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 first year if the percentage of completion method was used?

Under which of the following circumstances would revenue normally be recognised?

Highrise Constructions Ltd had a large 3-year project with total revenue of $5 000 000 and estimated total costs of $4 200 000. The project was 25% complete at the end of the first year, 55% 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 third year if the percentage of completion method was used?