Deck 18: Revenue

Question 1

Companies should recognize revenue when it is probable that the economic benefits will flow to the company and when cash is received.

Answer 1

False

Question 2

If a company cannot estimate reliably the outcome of a transaction involving the providing of a service, it recognizes revenue only to the extent of the expenses recoverable.

Answer 2

True

Question 3

If a company sells its product but gives the buyer the right to return it, the company should not recognize revenue until the sale is collected.

Answer 3

False

Question 4

A loss in the current period on a profitable contract must be recognized under both the percentage-of-completion and cost-recovery method.

Question 5

For contracts in progress, companies should disclose the aggregate amount of costs incurred and recognized net income.

Question 6

Companies must recognize a loss on an unprofitable contract under the percentage-of-completion method but not the cost-recovery method.

Question 7

When services are delivered by performing more than one act, revenue should be recognized as the various acts that make up the entire transaction occur.

Question 8

Under the accretion approach, companies recognize revenue when precious metals are mined because the sales price is reasonably assured.

Question 9

The most popular input measure used to determine the progress toward completion is the cost-to-cost basis.

Question 10

Companies must use the percentage-of-completion method when estimates of progress toward completion can be estimated reliably.

Question 11

Revenue should be measured at the fair value of consideration received or receivable.

Question 12

The cost-recovery method recognizes revenue only to the extent of costs incurred that are expected to be recoverable.

Question 13

In service contracts, the general rule is that the collection of cash is the critical event for revenue recognition.

Question 14

The Construction in Process account includes only construction costs under the percentage-of-completion method.

Question 15

Delayed recognition of revenue is appropriate if the sale does not represent substantial completion of the earnings process.

Question 16

The provision for a loss on an unprofitable contract may be combined with the Construction in Process account balance under percentage-of-completion but not cost-recovery.

Question 17

If the goods (services) that are exchanged in barter transactions are dissimilar in nature, the exchange is recorded as revenue.

Question 18

Under the cost-recovery method, companies recognize revenue and costs only when the contract is completed.

Question 19

In a multiple-deliverable arrangement, once the separate units of accounting are determined, the amount paid for the arrangement is allocated among the separate units based on relative fair value.

Question 20

If the difference between the Construction in Process and the Billings on Construction in Process account balances is a debit, the difference is reported as a current asset.

Question 21

Companies must use the percentage-of-completion method when reliable estimates are available for each of the following except

A)progress toward completion.
B)cash flows.
C)costs.
D)revenues.

Question 22

Under IFRS, when a barter transaction occurs and the goods exchanged are similar

A)The exchange is recorded as revenue.
B)The company has transferred to the buyer the significant risks and rewards of ownership of the goods.
C)Revenue is not reported.
D)The critical event is considered to be the date the goods or services are exchanged.

Question 23

In accounting for a long-term construction-type contract using the percentage-of-completion method, the gross profit recognized during the first year would be the estimated total gross profit from the contract, multiplied by the percentage of the costs incurred during the year to the

A)total costs incurred to date.
B)total estimated cost.
C)unbilled portion of the contract price.
D)total contract price.

Question 24

A sale should not be recognized as revenue by the seller at the time of sale if

A)payment was made by check.
B)the selling price is less than the normal selling price.
C)the buyer has a right to return the product and the amount of future returns cannot be reliably estimated.
D)none of these.

Question 25

How should the balances of progress billings and construction in process be shown at reporting dates prior to the completion of a long-term contract?

A)Progress billings as deferred revenue, construction in progress as a deferred expense.
B)Progress billings as revenue, construction in process as inventory.
C)Net, as a current asset if debit balance, and current liability if credit balance.
D)Net, as income from construction if credit balance, and loss from construction if debit balance.

Question 26

Under IFRS, revenue from bill-and-hold sales is recognized when
I)It is probable that goods will be delivered
II)The item is identified, on hand, and ready for delivery
III)The goods (services) exchanged are dissimilar in nature
IV)The buyer acknowledges the deferred delivery arrangement
V)Usual payment terms apply

A)I, III, IV, and V.
B)I, II, III, IV, and V.
C)I and V.
D)I, II, IV, and V.

Question 27

Which of the following most correctly states how revenue is measured?

A)Fair value of consideration received or receivable plus cash discounts and volume discounts.
B)Fair value of consideration received or receivable less cash discounts plus interest if payment is deferred
C)Fair value of consideration given up or surrendered less interest, cash and volume discounts.
D)Fair value of consideration given up or surrendered less cash discounts plus interest if payment is deferred

Question 28

The percentage-of-completion method must be used when certain conditions exist.Which of the following is not one of those necessary conditions?

A)Estimates of progress toward completion, revenues, and costs can be estimated reliably.
B)Total contract revenue can be measured reliably.
C)The buyer can be expected to satisfy some of the obligations under the contract.
D)It is probable that the economic benefits associated with the contract will flow to the company.

Question 29

When a company exchanges goods for goods of another company, the exchange is recorded as revenue if the goods exchanged are

A)dissimilar in nature.
B)similar in nature.
C)similar or dissimilar in nature.
D)swapped to meet demand at various locations on a timely basis.

Question 30

The revenue recognition principle indicates that revenue is recognized when
I)The benefits can be measured reliably.
II)The sales transaction is initiated and completed.
III)It is probable the benefits will flow to the company.
IV)The date of sale, date of delivery, and billing have all occurred.

A)I, II, and III.
B)II and III.
C)I and III.
D)I, II, III and IV.

Question 31

When work to be done and costs to be incurred on a long-term contract can be estimated reliably, which of the following methods of revenue recognition is preferable?

A)Completion-of-production method
B)Percentage-of-completion method
C)cost-recovery method
D)None of these

Question 32

Each of the following conditions must be met to recognize revenue from the sale of goods except

A)the company has transferred to the buyer the significant risks and rewards of ownership of the goods.
B)the amount of revenue can be measured reliably.
C)the costs incurred or to be incurred can be estimated reliably.
D)it is possible that the economic benefits will flow to the company.

Question 33

Revenue is recognized by the consignor when the

A)goods are shipped to the consignee.
B)consignee receives the goods.
C)consignor receives an advance from the consignee.
D)consignor receives an account sales notification from the consignee.

Question 34

An alternative not available when the seller is exposed to continued risks of ownership through right of return of the product is

A)recording the sale, and accounting for returns as they occur in future periods.
B)not recording a sale until all return privileges have expired.
C)recording the sale, but reducing sales by an estimate of future returns.
D)all of these are alternatives.

Question 35

Under the cost-recovery method

A)revenue, cost, and gross profit are recognized during production.
B)revenue and cost are recognized during production, but gross profit recognition is deferred until all costs are incurred.
C)revenue, cost, and gross profit are recognized at the time the contract is completed.
D)none of these.

Question 36

Which of the following are recognized each period under the cost-recovery method?

A)Costs only.
B)Revenues only.
C)Both costs and revenues.
D)none of these.

Question 37

Sales in which the buyer is not yet ready to take delivery but does take title are

A)barter slaes.
B)bill and hold sales.
C)layaway sales.
D)sales with buyback.

Question 38

The revenue recognition principle indicates that revenue is recognized when it is probable that the

A)economic benefits will flow to the company.
B)benefits can be measured reliably.
C)economic benefits will flow to the company and the benefits can be measured reliably.
D)none of these.

Question 39

The IASB

A)Has issued over 100 standards related to revenue recognition.
B)Has issued one standard related to revenue recognition.
C)Indicates that the present state of reporting for revenue is satisfactory.
D)All of the choices are correct.

Question 40

In consignment sales, the consignee

A)records the merchandise as an asset on its books.
B)records a liability for the merchandise held on consignment.
C)recognizes revenue when it ships merchandise to the consignor.
D)prepares an "account report" for the consignor which shows sales, expenses, and cash receipts.

Question 41

Monroe Construction Company uses the percentage-of-completion method of accounting.In 2012, Monroe began work on a contract it had received which provided for a contract price of $15,000,000.Other details follow:

What should be the gross profit recognized in 2012?

A)$600,000
B)$7,800,000
C)$1,800,000
D)$3,000,000

Question 42

Use the following information for questions.The contract calls for progress billings and payments of $620,000 each quarter.The total contract price is $7,440,000 and Seasons estimates total costs of $7,100,000.Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2010.
At December 31, 2011, Seasons Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $7,200,000 due to unanticipated price increases.What is reported in the statement of financial position at December 31, 2011 for Seasons as the difference between the Construction in Process and the Billings on Construction in Process accounts, and is it a debit or a credit?

Question 43

Use the following information for questions.
In 2012, Fargo Corporation began construction work under a three-year contract.The contract price is $2,400,000.Fargo uses the percentage-of-completion method for financial accounting purposes.The income to be recognized each year is based on the proportion of costs incurred to total estimated costs for completing the contract.The financial statement presentations relating to this contract at December 31, 2012, follow:

What was the initial estimated total income before tax on this contract?

A)$300,000
B)$320,000
C)$400,000
D)$480,000

Question 44

Safe Skies Travel sells airplane tickets for Global Airways, Inc.Safe Skies collects the full airfare from the client and remits this amount, less a commission, to Global Airways, Inc.Safe Skies receives a commission of 6% of the total price.During June, 2012, Safe Skies sold tickets worth €640,000 and remits €601,600 to Global Airways, Inc.For June 2012, what amount of revenue should Safe Skies Travel record?

A)€640,000
B)€601,600
C)€38,400
D)€36,096

Question 45

A franchise agreement grants the franchisor an option to purchase the franchisee's business.It is probable that the option will be exercised.When recording the initial franchise fee, the franchisor should

A)record the entire initial franchise fee as a deferred credit which will reduce the franchisor's investment in the purchased outlet when the option is exercised.
B)record the entire initial franchise fee as unearned revenue which will reduce the amount of cash paid when the option is exercised.
C)record the portion of the initial franchise fee which is attributable to the bargain purchase option as a reduction of the future amounts receivable from the franchisee.
D)None of these.

Question 46

The following information relates to questions
Cooper Construction Company had a contract starting April 2012, to construct a $9,000,000 building that is expected to be completed in September 2014, at an estimated cost of $8,250,000.At the end of 2012, the costs to date were $3,795,000 and the estimated total costs to complete had not changed.The progress billings during 2012 were $1,800,000 and the cash collected during 2012 was 1,200,000.
For the year ended December 31, 2012, Cooper would recognize gross profit on the building of:

A)$316,250
B)$345,000
C)$405,000
D)$0

Question 47

Continuing franchise fees should be recorded by the franchisor

A)as revenue when earned and receivable from the franchisee.
B)as revenue when received.
C)in accordance with the accounting procedures specified in the franchise agreement.
D)as revenue only after the balance of the initial franchise fee has been collected.

Question 48

Adler Construction Co.uses the percentage-of-completion method.In 2010, Adler began work on a contract for $3,300,000 and it was completed in 2011.Data on the costs are:

Question 49

On July 1, 2011, Panther, Inc.sold goods to Smart Company for €1,800,000 in exchange for a 4-year zero-interest-bearing note in the face amount of €2,832,326.The goods have an inventory cost on Panther's books of €1,180,000.Later in the month, Smart Company expects to be able to re-sell the goods for €2,040,000.How much revenue should Panther, Inc.recognize on its books on July 1, 2011?

A)€1,800,000.
B)€2,040,000.
C)€2,832,326.
D)€1,180,000.

Question 50

Use the following information for questions.The contract calls for progress billings and payments of $620,000 each quarter.The total contract price is $7,440,000 and Seasons estimates total costs of $7,100,000.Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2010.
Seasons Construction completes the remaining 25% of the building construction on December 31, 2012, as scheduled.At that time the total costs of construction are $7,500,000.What is the total amount of Revenue from Long-Term Contracts and Construction Expenses that Seasons will recognize for the year ended December 31, 2012?

Question 51

On January 1, 2012, Hood Company sold specialized computers costing $760,000 to Crater, Inc.for $990,000.Hood Company's technicians must complete the installation, and Hood Company's trainers present numerous training sessions for Crater's employees during the installation period.Carter made a 50% down payment, with the balance due upon completion of installation.How much revenue should Hood Company recognize on its books on January 1, 2012?

A)$-0-
B)$760,000.
C)$495,000.
D)$990,000.

Question 52

Types of franchising arrangements include all of the following except

A)service sponsor-retailer.
B)wholesaler-service sponsor.
C)manufacturer-wholesaler.
D)wholesaler-retailer.

Question 53

Hayes Construction Corporation contracted to construct a building for $1,500,000.Construction began in 2010 and was completed in 2011.Data relating to the contract are summarized below:
Hayes uses the percentage-of-completion method as the basis for income recognition.For the years ended December 31, 2010, and 2011, respectively, Hayes should report gross profit of

A)$270,000 and $180,000.
B)$900,000 and $600,000.
C)$300,000 and $150,000.
D)$0 and $450,000.

Question 54

Occasionally a franchise agreement grants the franchisee the right to make future bargain purchases of equipment or supplies.When recording the initial franchise fee, the franchisor should

A)increase revenue recognized from the initial franchise fee by the amount of the expected future purchases.
B)record a portion of the initial franchise fee as unearned revenue which will increase the selling price when the franchisee subsequently makes the bargain purchases.
C)defer recognition of any revenue from the initial franchise fee until the bargain purchases are made.
D)None of these.

Question 55

Some of the initial franchise fee may be allocated to

A)continuing franchise fees.
B)interest revenue on the future installments.
C)options to purchase the franchisee's business.
D)All of these may reduce the amount of the initial franchise fee that is recognized as revenue.

Question 56

The following information relates to questions
Cooper Construction Company had a contract starting April 2012, to construct a $9,000,000 building that is expected to be completed in September 2014, at an estimated cost of $8,250,000.At the end of 2012, the costs to date were $3,795,000 and the estimated total costs to complete had not changed.The progress billings during 2012 were $1,800,000 and the cash collected during 2012 was 1,200,000.
At December 31, 2012 Cooper would report Construction in Process in the amount of:

A)$345,000
B)$3,795,000
C)$4,140,000
D)$3,540,000

Question 57

Use the following information for questions.The contract calls for progress billings and payments of $620,000 each quarter.The total contract price is $7,440,000 and Seasons estimates total costs of $7,100,000.Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2010.
At December 31, 2011, Seasons Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $7,200,000 due to unanticipated price increases.What is the total amount of Construction Expenses that Seasons will recognize for the year ended December 31, 2011?

A)$5,400,000
B)$3,150,000
C)$3,195,000
D)$3,270,000

Question 58

Use the following information for questions.The contract calls for progress billings and payments of $620,000 each quarter.The total contract price is $7,440,000 and Seasons estimates total costs of $7,100,000.Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2010.
At December 31, 2010, Seasons estimates that it is 30% complete with the construction, based on costs incurred.What is the total amount of Revenue from Long-Term Contracts recognized for 2010 and what is the balance in the Accounts Receivable account assuming Cannon Cafe has not yet made its last quarterly payment?

Question 59

Cost estimates on a long-term contract may indicate that a loss will result on completion of the entire contract.In this case, the entire expected loss should be

A)recognized in the current period, regardless of whether the percentage-of-completion or cost-recovery method is employed.
B)recognized in the current period under the percentage-of-completion method, but the cost-recovery method should defer recognition of the loss to the time when the contract is completed.
C)recognized in the current period under the cost-recovery method, but the percentage-of-completion method should defer the loss until the contract is completed.
D)deferred and recognized when the contract is completed, regardless of whether the percentage-of-completion or cost-recovery method is employed.

Question 60

Use the following information for questions.
In 2012, Fargo Corporation began construction work under a three-year contract.The contract price is $2,400,000.Fargo uses the percentage-of-completion method for financial accounting purposes.The income to be recognized each year is based on the proportion of costs incurred to total estimated costs for completing the contract.The financial statement presentations relating to this contract at December 31, 2012, follow:

How much cash was collected in 2012 on this contract?

A)$100,000
B)$140,000
C)$20,000
D)$240,000

Question 61

The following information relates to questions
Bensen Corporation manufactures equipment used in the construction industry.Bensen manufactures a wide variety of machinery, including very small individual pieces of machinery to very large, complex systems containing numerous components.Unit selling prices range from $50,000 to $5,000,000 and are quoted inclusive of installation and training.The installation process does not involve changes to the features of the equipment and does not require proprietary information about the equipment in order for the installed equipment to perform to specifications.
Bensen Corporation has the following agreement with Keller Inc.:
<\font>purchases equipment from Bensen for a price of $2,000,000 and chooses Bensen to do the installation.Bensen charges the same price for the equipment irrespective of whether it does the installation or not.
<\font>The price of the installation service is estimated to have a fair value of $100,000.The fair value of the training sessions is estimated at $200,000.
<\font>Keller is obligated to pay Bensen the $2,000,000 upon the delivery and installation of the equipment.
<\font>Bensen delivers the equipment on September 1, 2011, and completes the installation of the equipment on November 1, 2011.Training related to the equipment starts once the installation is completed and lasts for 1 year.The equipment has a useful life of 10 years.
Training revenue recognized in 2011 would be

A)$0
B)$29,333.
C)$58,667.
D)$176,000.

Question 62

Wynn, Inc.has a contract to construct a large hotel for $12,000,000.The contract was signed on January 2, 2010 and it was expected that the hotel would be complete on December 31, 2013.At the date the contract was signed, Wynn, Inc.anticipated the costs of construction would total $11,000,000.At the end of 2011 the costs incurred were $3,490,000 and its estimate of total contract costs rose to $11,870,000.During 2012, the company incurred costs of $4,020,000 and by the end of 2012 the total cost estimate rose to $12,400,000.Due to certain circumstances, Wynn, Inc.believes there are inherent hazards in the contract beyond the normal, recurring business risks.Wynn, Inc.expects to recover all its costs under the contract.Under these conditions, what amount of revenue should Wynn, Inc.recognize in each of the following years?

Question 63

Use the following information for questions.
Gorman Construction Co.began operations in 2012.Construction activity for 2012 is shown below.Gorman uses the cost-recovery method.

Which of the following should be shown on the statement of financial position at December 31, 2012 related to Contract 2?

A)Inventory, $680,000
B)Inventory, $820,000
C)Current liability, $680,000
D)Current liability, $1,500,000

Question 64

Use the following information for questions.
Kiner, Inc.began work in 2010 on a contract for $8,400,000.Other data are as follows:

If Kiner uses the cost-recovery method, the gross profit to be recognized in 2011 is

A)$1,360,000.
B)$2,800,000.
C)$1,400,000.
D)$5,600,000.

Question 65

Use the following information for questions.
Eilert Construction Company had a contract starting April 2011, to construct a $15,000,000 building that is expected to be completed in September 2012, at an estimated cost of $13,750,000.At the end of 2011, the costs to date were $6,325,000 and the estimated total costs to complete had not changed.The progress billings during 2011 were $3,000,000 and the cash collected during 2011 was $2,000,000.Eilert uses the percentage-of-completion method.
At December 31, 2011, Eilert would report Construction in Process in the amount of

A)$6,900,000.
B)$6,325,000.
C)$5,900,000.
D)$575,000.

Question 66

Lark Corp.has a contract to construct a $5,000,000 cruise ship at an estimated cost of $4,000,000.The company will begin construction of the cruise ship in early January 2011 and expects to complete the project sometime in late 2014.Lark Corp.has never constructed a cruise ship before, and the customer has never operated a cruise ship.Due to this and other circumstances, Lark Corp.believes there are inherent hazards in the contract beyond the normal, recurring business risks.Lark Corp.expects to recover all its costs under the contract.During 2011 and 2012, the company has the following activity:

For the year ended December 31, 2012, how much revenue should Lark Corp.recognize on its income statement?

A)$980,000
B)$2,040,000
C)$1,300,000
D)$1,060,000

Question 67

The following information relates to questions
Bensen Corporation manufactures equipment used in the construction industry.Bensen manufactures a wide variety of machinery, including very small individual pieces of machinery to very large, complex systems containing numerous components.Unit selling prices range from $50,000 to $5,000,000 and are quoted inclusive of installation and training.The installation process does not involve changes to the features of the equipment and does not require proprietary information about the equipment in order for the installed equipment to perform to specifications.
Bensen Corporation has the following agreement with Keller Inc.:
$\bullet$ purchases equipment from Bensen for a price of $2,000,000 and chooses Bensen to do the installation.Bensen charges the same price for the equipment irrespective of whether it does the installation or not.
$\bullet$ The price of the installation service is estimated to have a fair value of $100,000.The fair value of the training sessions is estimated at $200,000.
$\bullet$ Keller is obligated to pay Bensen the $2,000,000 upon the delivery and installation of the equipment.
$\bullet$ Bensen delivers the equipment on September 1, 2011, and completes the installation of the equipment on November 1, 2011.Training related to the equipment starts once the installation is completed and lasts for 1 year.The equipment has a useful life of 10 years.

-How much, if any of the sales price of $2,200,000 is allocated to the installation component?

A)$0
B)$100,000
C)$88,000
D)$176,000

Question 68

Lark Corp.has a contract to construct a $5,000,000 cruise ship at an estimated cost of $4,000,000.The company will begin construction of the cruise ship in early January 2011 and expects to complete the project sometime in late 2014.Lark Corp.has never constructed a cruise ship before, and the customer has never operated a cruise ship.Due to this and other circumstances, Lark Corp.believes there are inherent hazards in the contract beyond the normal, recurring business risks.Lark Corp.expects to recover all its costs under the contract.During 2011 and 2012, the company has the following activity:

On its statement of financial position at December 31, 2012, what amount will be reported related to the Construction in Process account?

A)$40,000 costs in excess of billings.
B)$1,020,000 costs in excess of billings.
C)$40,000 billings in excess of costs.
D)$20,000 billings in excess of costs.

Question 69

Remington Construction Company uses the percentage-of-completion method.During 2010, the company entered into a fixed-price contract to construct a building for Sherman Company for $30,000,000.The following details pertain to the contract:
The amount of construction costs incurred during 2011 was

A)$15,000,000.
B)$9,375,000.
C)$5,625,000.
D)$2,500,000.

Question 70

Use the following information for questions.
Gomez, Inc.began work in 2010 on contract #3814, which provided for a contract price of $7,200,000.Other details follow:

Assume that Gomez uses the cost-recovery method of accounting.The portion of the total gross profit to be recognized as income in 2011 is

A)$900,000.
B)$1,350,000.
C)$2,325,000.
D)$7,200,000.

Question 71

Use the following information for questions.
Gorman Construction Co.began operations in 2012.Construction activity for 2012 is shown below.Gorman uses the cost-recovery method.

Which of the following should be shown on the income statement for 2012 related to Contract 1?

A)Gross profit, $450,000
B)Gross profit, $1,000,000
C)Gross profit, $1,050,000
D)Gross profit, $600,000

Question 72

Hiser Builders, Inc.is using the cost-recovery method for a $5,600,000 contract that will take two years to complete.Data at December 31, 2012, the end of the first year, are as follows:
The gross profit or loss that should be recognized for 2012 is

A)$0.
B)a $240,000 loss.
C)a $120,000 loss.
D)a $105,600 loss.

Question 73

Use the following information for questions.
Gorman Construction Co.began operations in 2012.Construction activity for 2012 is shown below.Gorman uses the cost-recovery method.

Which of the following should be shown on the statement of financial position at December 31, 2012 related to Contract 3?

A)Inventory, $200,000
B)Inventory, $350,000
C)Inventory, $2,100,000
D)Inventory, $2,250,000

Question 74

Use the following information for questions.
Gomez, Inc.began work in 2010 on contract #3814, which provided for a contract price of $7,200,000.Other details follow:

Assume that Gomez uses the percentage-of-completion method of accounting.The portion of the total gross profit to be recognized as income in 2010 is

A)$450,000.
B)$600,000.
C)$1,800,000.
D)$2,400,000.

Question 75

Spenders Company is an experienced home appliance dealer.Spenders Company also offers a number of services together with the home appliances that it sells (installation and maintenance).Spenders Company sells dishwashers on a standalone basis, it also sells installation and maintenance service for the dishwashers.

In cases where maintenance services are provided, the maintenance service is separately priced within the arrangement at $350.Dishwashers are sold subject to a general right of return.If a customer purchases a dishwasher with installation and\or maintenance services, in the event Spenders Company does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $1,600.On January 1, 2012, Spenders Company sells 100 dishwashers to Condo Complex, Inc.a developer of high-rise condos.The dishwashers are installed and Condo Complex, Inc.purchases the dishwashers with the installation and maintenance services.The total price for the 100 dishwashers is $190,000.How much revenue should Spenders Company allocate to the dishwashers?

A)$150,000
B)$190,000
C)$152,000
D)$160,000

Question 76

Use the following information for questions.
Eilert Construction Company had a contract starting April 2011, to construct a $15,000,000 building that is expected to be completed in September 2012, at an estimated cost of $13,750,000.At the end of 2011, the costs to date were $6,325,000 and the estimated total costs to complete had not changed.The progress billings during 2011 were $3,000,000 and the cash collected during 2011 was $2,000,000.Eilert uses the percentage-of-completion method.
For the year ended December 31, 2011, Eilert would recognize gross profit on the building of

A)$0.
B)$527,083.
C)$575,000.
D)$675,000.

Question 77

Spenders Company is an experienced home appliance dealer.Spenders Company also offers a number of services together with the home appliances that it sells (installation and maintenance).Spenders Company sells dishwashers on a standalone basis, it also sells installation and maintenance service for the dishwashers.
Pricing for dishwashers is as follows:

In cases where maintenance services are provided, the maintenance service is separately priced within the arrangement at $350.Dishwashers are sold subject to a general right of return.If a customer purchases a dishwasher with installation and\or maintenance services, in the event Spenders Company does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $1,600.On January 1, 2012, Spenders Company sells 100 dishwashers to Condo Complex, Inc.a developer of high-rise condos.The dishwashers are installed and Condo Complex, Inc.purchases the dishwashers with the installation and maintenance services.The total price for the 100 dishwashers is $190,000.How much revenue should Spenders Company allocate to the maintenance services?

A)$-0-
B)$33,250
C)$35,000
D)$30,000

Question 78

Use the following information for questions.
Kiner, Inc.began work in 2010 on a contract for $8,400,000.Other data are as follows:

If Kiner uses the percentage-of-completion method, the gross profit to be recognized in 2010 is

A)$1,440,000.
B)$1,600,000.
C)$2,160,000.
D)$2,400,000.

Question 79

Lark Corp.has a contract to construct a $5,000,000 cruise ship at an estimated cost of $4,000,000.The company will begin construction of the cruise ship in early January 2011 and expects to complete the project sometime in late 2014.Lark Corp.has never constructed a cruise ship before, and the customer has never operated a cruise ship.Due to this and other circumstances, Lark Corp.believes there are inherent hazards in the contract beyond the normal, recurring business risks.Lark Corp.expects to recover all its costs under the contract.During 2011 and 2012, the company has the following activity:

On its statement of financial position at December 31, 2012, what amount will be reported for accounts receivable?

A)$352,000.
B)$720,000.
C)$72,000.
D)$2,000,000.

Question 80

Wynn, Inc.has a contract to construct a large hotel for $12,000,000.The contract was signed on January 2, 2010 and it was expected that the hotel would be complete on December 31, 2013.At the date the contract was signed, Wynn, Inc.anticipated the costs of construction would total $11,000,000.At the end of 2011 the total cost estimate rose to $11,870,000 and at the end of 2012 the total cost estimate rose to $12,400,000.Due to certain circumstances, Wynn, Inc.believes there are inherent hazards in the contract beyond the normal, recurring business risks.Wynn, Inc.expects to recover all its costs under the contract.Under these conditions, what amount of loss, if any, should Wynn, Inc.recognize in each of the following years?