Question 1

Use the following information for questions:
Sun Mountain operates a ski resort in the Rocky mountains of Alberta.They sell three types of ski tickets.Season tickets are sold throughout the year.and entitle the holder to ski any day all season long.They are non-refundable.Daily tickets are sold at the mountain and are only valid for the day they are sold.Corporate group tickets are sold throughout the year.The buyer receives a package of 20 daily ticket coupons at a discounted price and the coupons can be redeemed for a day of skiing any time during the season.The skier needs to present the coupon for a ticket on the desired ski day.Unused tickets coupons) expire at the end of the season and are non-refundable.
-How should Sun Mountain account for the corporate tickets not redeemed?

Accepted Answer

A) They should estimate an amount at the time of sale and recognize it as revenue then. 
B) They should estimate an amount at the time of sale and recognize it as revenue evenly throughout the ski season. 
C) They should estimate an amount at the time of sale and recognize it as revenue proportionally every time a coupon is redeemed. 
D) They should recognize it as revenue at the end of the ski season.

Question 2

Which of the following measures the amount of income earned per $1 invested in the company's shares?

Accepted Answer

A) ROI 
B) ROA 
C) ROE 
D) EPS

Question 3

Revenue is recognized at the time of collection under the:

Accepted Answer

A) completed contract method. 
B) point of sale method. 
C) percentage of completion method. 
D) instalment method.

Question 4

Use the following information for questions:
Dudeck Construction Co.agreed to build a bridge for Genoa City.The contract specifies that construction will take three years and Dudeck will receive $12,500,000.The company expects annual costs to be $3,500,000; $2,750,000; and $1,800,000.
-Assume Dudeck uses the percentage of completion method.Profits for year one will be:

Accepted Answer

A) $ -0- 
B) $ 1,483,333 
C) $1,934,783 
D) $ 4,450,000

Question 5

F.O.B.destination means that revenue is normally recognized when the goods reach the customer.

Accepted Answer

A) True 
 B)False

Question 6

During the current year, Sierra Corporation sold $1,250,000 in goods that cost $750,000.Cash sales were $500,000 and credit sales $750,000.Sierra collected $500,000 of the credit sales during the year.What amount of revenue should Jamul recognize for the year under the revenue recognition principle?

Accepted Answer

A) $1,250,000 
B) $ 500,000 
C) $ 750,000 
D) $ 1,000,000

Question 7

The revenue recognition method most often used for short-term construction projects is to recognize revenue:

Accepted Answer

A) during the construction process as a percentage of the costs completed. 
B) at the completion of the project. 
C) at the time the construction contract is signed. 
D) as cash is received.

Question 8

Use the following information for questions:
A corporation sold a tract of land for $525,000 that had originally cost $350,000.The buyer will make three annual payments of: $250,000; $125,000; and $150,000.Ignore interest and use the instalment method.
-The unrecognized profit at the end of year two amounts to:

Accepted Answer

A) $0 
B) $50,000 
C) $91,667 
D) $175,000

Question 9

An investor invested $25,000 in a company's common shares and sold it one year later for $32,500.During that year the company had average total assets of $3,750,000, average common shareholders' equity of $550,000, sales of $1,250,000 and net income of $ 125,000.The investor's ROI for the period was closest to?

Accepted Answer

A) 10% 
B) 22.7% 
C) 26% 
D) 30%

Question 10

Use the following information for questions:
Dudeck Construction Co.agreed to build a bridge for Genoa City.The contract specifies that construction will take three years and Dudeck will receive $12,500,000.The company expects annual costs to be $3,500,000; $2,750,000; and $1,800,000.
-Assume Dudeck uses the percentage of completion method.Revenue recognized in year three will be:

Accepted Answer

A) $1,800,000 
B) $2,795,030 
C) $4,166,667 
D) $12,500,000

Question 11

Bracor is a gold mining company located in British Columbia.The critical event in the revenue earning process for this company is likely to occur when:

Accepted Answer

A) the gold is produced. 
B) the gold is received by the customer. 
C) the customer pays for the gold. 
D) the gold is sold on the open market.

Question 12

Revenue may be recognized during production in which of the following types of business?

Accepted Answer

A) Retail sales 
B) Manufacturing for mass-production 
C) Construction 
D) Franchise operations

Question 13

The Smiths decided to open a Bed and Breakfast.In the first month of operation they collected cash and credit card receipts of $1,800.All rooms rent out at $75 a night and during the month they had 19 room rentals and had received non-refundable deposits of $37.50 each on another five nights of rentals.For two of those deposits the people had failed to show up and the Smiths did not refund the deposits, the other three deposits were for future stays.The appropriate amount for them to recognize as revenue for their first month is:

Accepted Answer

A) $1,425 
B) $1,500 
C) $1,800 
D) $1,575

Question 14

Except for cash sales, revenue recognition criteria are almost met before the collection of cash; the exception to this is the:

Accepted Answer

A) completed contract method 
B) percentage completion method 
C) instalment method 
D) recognition of unearned revenue method

Question 15

Use the following information for questions:
Sun Mountain operates a ski resort in the Rocky mountains of Alberta.They sell three types of ski tickets.Season tickets are sold throughout the year.and entitle the holder to ski any day all season long.They are non-refundable.Daily tickets are sold at the mountain and are only valid for the day they are sold.Corporate group tickets are sold throughout the year.The buyer receives a package of 20 daily ticket coupons at a discounted price and the coupons can be redeemed for a day of skiing any time during the season.The skier needs to present the coupon for a ticket on the desired ski day.Unused tickets coupons) expire at the end of the season and are non-refundable.
-When should Sun Mountain recognize revenue for the season tickets?

Accepted Answer

A) At the time of sale. 
B) On the day the mountain first opens for skiing. 
C) Throughout the ski season. 
D) At the end of the ski season.

Question 16

A company may choose numerous methods of recognizing revenue for different revenue types.

Accepted Answer

A) True 
 B)False

Question 17

The cost recovery and completed contract methods are two examples of revenue recognition being postponed until the cash from a sale is collected.

Accepted Answer

A) True 
 B)False

Question 18

The incentive built in for prompt payment of cash by a customer for a credit sale is called a cash discount.

Accepted Answer

A) True 
 B)False

Question 19

Angel Gifts is a giftware wholesaler.All orders are shipped FOB destination and paid for on delivery.When should Angel Gifts recognize its revenues?

Accepted Answer

A) At the time of shipping 
B) When the goods reach the customer 
C) When payment is received 
D) When the goods are placed into inventory

Question 20

Revenue is recognized at the time of production in which of the following types of companies?

Accepted Answer

A) Long term construction 
B) Real Estate 
C) Franchises 
D) Grocery

Exam 4: Revenue Recognition

Which of the following measures the amount of income earned per $1 invested in the company's shares?

Revenue is recognized at the time of collection under the:

F.O.B.destination means that revenue is normally recognized when the goods reach the customer.

The revenue recognition method most often used for short-term construction projects is to recognize revenue:

Bracor is a gold mining company located in British Columbia.The critical event in the revenue earning process for this company is likely to occur when:

Revenue may be recognized during production in which of the following types of business?

Except for cash sales, revenue recognition criteria are almost met before the collection of cash; the exception to this is the:

A company may choose numerous methods of recognizing revenue for different revenue types.

The cost recovery and completed contract methods are two examples of revenue recognition being postponed until the cash from a sale is collected.

The incentive built in for prompt payment of cash by a customer for a credit sale is called a cash discount.

Angel Gifts is a giftware wholesaler.All orders are shipped FOB destination and paid for on delivery.When should Angel Gifts recognize its revenues?

Revenue is recognized at the time of production in which of the following types of companies?