Question 1

Distinguish between an installment sale and a revolving credit agreement (e.g., as happens with a credit card, where there is a sequence of purchases and payments).

Accepted Answer

Under an installment sale, a customer ag...

Question 2

Its return on assets for 2009.

Accepted Answer

Its return on assets...

Question 3

In its December 31, 2009, balance sheet, Lake would report:

Accepted Answer

A)  Deferred gross profit of $700,000.
B)  Deferred gross profit of $600,000.
C)  Installment receivables (net)  of $700,000.
D)  Installment receivables (net)  of $400,000.As of 12/31/2009, the installment receivable would be as follows:E) A) and D)
F) C) and D)

Question 4

The percentage-of-completion method is preferable to the completed contract method and should only be avoided if

Accepted Answer

A)  Completion rates are certain.
B)  Profits are low.
C)  Projects are more than five years to completion.
D)  There is a lack of dependable estimates or inherent hazards cause forecasts to be doubtful.E) B) and C)
F) A) and D)

Question 5

In its December 31, 2009, balance sheet, Lake would report:

Accepted Answer

A)  Deferred gross profit of $700,000.
B)  Deferred gross profit of $1,050,000.
C)  Installment receivables (net)  of $750,000.
D)  Installment receivables (net)  of $900,000.As of 12/31/2009, the installment receivable would be as follows:E) A) and C)
F) None of the above

Question 6

In 2009, Rigsby would recognize realized gross profit of:

Accepted Answer

A)  $500,000.
B)  $ 0.
C)  $900,000.
D)  $100,000.Gross profit % = ($4,500,000 3,600,000) /$4,500,000 = 20% 2009: 20% $500,000 = $100,000E) All of the above
F) A) and C)

Question 7

Required: Compute the average days in inventory for 2008.

Accepted Answer

365 / 4.0 ...

Question 8

Its inventory turnover ratio for 2009.

Accepted Answer

Its inventory turnov...

Question 9

Required: Compute the asset turnover ratio for 2008.

Accepted Answer

$400,000 /...

Question 10

What is the fixed contract price for CCC's project?

Accepted Answer

A)  $120 million
B)  $225 million
C)  $345 million
D)  None of these is correct Gross profit recognized in 2009 of $72 million = 60% of estimated gross project on the project.Therefore, total gross profit is estimated at $72 million/.6 = $120 million.Since Gross profit = Contract price Estimated total construction costs of $225 million, the Contract price = $120 million + $225 million = $345 million.E) B) and C)
F) A) and D)

Question 11

Hulkster's 2009 average days in inventory is:

Accepted Answer

A)  60.5 days.
B)  92.2 days.
C)  100.8 days.
D)  89.7 days.Average days in inventory = 365/3.62 = 100.8 daysE) A) and C)
F) A) and B)

Question 12

Assume that at the time of signing the contract, collection of the receivable was assured and that service obligations were substantial. However, by October 20, 2008, substantially all continuing obligations had been met. The journal entry required at October 20, 2008 would include a:

Accepted Answer

A)  Credit to franchise fee receivable for $27,000.
B)  Debit to unearned franchise fee revenue for $36,000.
C)  Credit to franchise fee revenue for $9,000.
D)  Debit to unearned franchise fee revenue for $27,000.E) None of the above
F) All of the above

Question 13

In 2008, Lake would recognize realized gross profit of:

Accepted Answer

A)  $150,000.
B)  $ 0.
C)  $300,000.
D)  $450,000.Gross profit % = ($900,000 $450,000) /$900,000 = 50% 2008: 50% $300,000 = $150,000E) A) and C)
F) A) and D)

Question 14

In its 2008 year-end balance sheet, Reliable would report installment receivables (net)  of:

Accepted Answer

A)  $20,000.
B)  $35,000.
C)  $25,909.
D)  $10,000.E) None of the above
F) B) and D)

Question 15

Required: Compute the return on assets for 2008.

Accepted Answer

$25,000 / ...

Question 16

Dowling's average total assets for 2009 is:

Accepted Answer

A)  32.
B)  210.
C)  115.
D)  194.Return on assets = net income / (avg assets) , so average assets = net income/ROA = 20 /.103 = 194.E) A) and C)
F) B) and C)

Question 17

Briefly explain the critical similarities and differences between the completed contract method used by US GAAP and the cost recovery method used in IFRS for accounting for long-term contracts when the percentage-of-completion method is not appropriate. (Ignore accounting for contract losses.)

Accepted Answer

Under the completed contract method, no ...

Question 18

Big Bear Company deals in distressed properties and makes high risk sales. In 2008, the company sold for $250,000 a piece of property that cost $150,000. The cost recovery method was appropriately used. Collections on the sale were: $80,000 in 2008, $120,000 in 2009, and $50,000 in 2010.
Required: Prepare journal entries to record the sale, cash collections, and recognition of gross profit (if appropriate) in 2008, 2009, and 2010.

Accepted Answer

The answer of Big Bear Company deals in distressed properties...

Question 19

Assume that Beavis uses the percentage-of-completion method for revenue recognition.
Required: Prepare all journal entries to record costs, billings, collections, and profit recognition.

Accepted Answer

The answer of Assume that Beavis uses the percentage-of-completion method...

Question 20

When the right of return exists, revenue can be recognized at the point of sale if the seller can make reliable estimates of future returns.

Accepted Answer

A) True 
 B)False

Exam 5: Income Measurement

Its inventory turnover ratio for 2009.

Correct Answer
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Its inventory turnov...
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Dowling's average total assets for 2009 is:

Correct Answer
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In 2008, Lake would recognize realized gross profit of:

Correct Answer
verified

Required: Compute the asset turnover ratio for 2008.

Correct Answer
verified
$400,000 /...
View Answer

When the right of return exists, revenue can be recognized at the point of sale if the seller can make reliable estimates of future returns.

Correct Answer
verified

Required: Compute the return on assets for 2008.

Correct Answer
verified
$25,000 / ...
View Answer

The percentage-of-completion method is preferable to the completed contract method and should only be avoided if

Correct Answer
verified

What is the fixed contract price for CCC's project?

Correct Answer
verified

Distinguish between an installment sale and a revolving credit agreement (e.g., as happens with a credit card, where there is a sequence of purchases and payments).

Correct Answer
verified
Under an installment sale, a customer ag...
View Answer

Required: Compute the average days in inventory for 2008.

Correct Answer
verified
365 / 4.0 ...
View Answer

Its return on assets for 2009.

Correct Answer
verified
Its return on assets...
View Answer

Briefly explain the critical similarities and differences between the completed contract method used by US GAAP and the cost recovery method used in IFRS for accounting for long-term contracts when the percentage-of-completion method is not appropriate. (Ignore accounting for contract losses.)

Correct Answer
verified
Under the completed contract method, no ...
View Answer

Assume that at the time of signing the contract, collection of the receivable was assured and that service obligations were substantial. However, by October 20, 2008, substantially all continuing obligations had been met. The journal entry required at October 20, 2008 would include a:

Correct Answer
verified

Hulkster's 2009 average days in inventory is:

Correct Answer
verified

In its December 31, 2009, balance sheet, Lake would report:

Correct Answer
verified

In its 2008 year-end balance sheet, Reliable would report installment receivables (net) of:

Correct Answer
verified

Correct Answer
verified

In 2009, Rigsby would recognize realized gross profit of:

Correct Answer
verified

Assume that Beavis uses the percentage-of-completion method for revenue recognition. Required: Prepare all journal entries to record costs, billings, collections, and profit recognition.

Correct Answer
verified

In its December 31, 2009, balance sheet, Lake would report:

Correct Answer
verified

Exam 5: Income Measurement

Its inventory turnover ratio for 2009.

Correct AnswerverifiedIts inventory turnov...View AnswerShow Answer

Dowling's average total assets for 2009 is:

Correct AnswerverifiedShow Answer

In 2008, Lake would recognize realized gross profit of:

Correct AnswerverifiedShow Answer

Required: Compute the asset turnover ratio for 2008.

Correct Answerverified$400,000 /...View AnswerShow Answer

When the right of return exists, revenue can be recognized at the point of sale if the seller can make reliable estimates of future returns.

Correct AnswerverifiedShow Answer

Required: Compute the return on assets for 2008.

Correct Answerverified$25,000 / ...View AnswerShow Answer

The percentage-of-completion method is preferable to the completed contract method and should only be avoided if

Correct AnswerverifiedShow Answer

What is the fixed contract price for CCC's project?

Correct AnswerverifiedShow Answer

Distinguish between an installment sale and a revolving credit agreement (e.g., as happens with a credit card, where there is a sequence of purchases and payments).

Correct AnswerverifiedUnder an installment sale, a customer ag...View AnswerShow Answer

Required: Compute the average days in inventory for 2008.

Correct Answerverified365 / 4.0 ...View AnswerShow Answer

Its return on assets for 2009.

Correct AnswerverifiedIts return on assets...View AnswerShow Answer

Briefly explain the critical similarities and differences between the completed contract method used by US GAAP and the cost recovery method used in IFRS for accounting for long-term contracts when the percentage-of-completion method is not appropriate. (Ignore accounting for contract losses.)

Correct AnswerverifiedUnder the completed contract method, no ...View AnswerShow Answer

Assume that at the time of signing the contract, collection of the receivable was assured and that service obligations were substantial. However, by October 20, 2008, substantially all continuing obligations had been met. The journal entry required at October 20, 2008 would include a:

Correct AnswerverifiedShow Answer

Hulkster's 2009 average days in inventory is:

Correct AnswerverifiedShow Answer

In its December 31, 2009, balance sheet, Lake would report:

Correct AnswerverifiedShow Answer

In its 2008 year-end balance sheet, Reliable would report installment receivables (net) of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In 2009, Rigsby would recognize realized gross profit of:

Correct AnswerverifiedShow Answer

Assume that Beavis uses the percentage-of-completion method for revenue recognition. Required: Prepare all journal entries to record costs, billings, collections, and profit recognition.

Correct AnswerverifiedShow Answer

In its December 31, 2009, balance sheet, Lake would report:

Correct AnswerverifiedShow Answer

Correct Answer
verified
Its inventory turnov...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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$400,000 /...
View Answer

Correct Answer
verified

Correct Answer
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$25,000 / ...
View Answer

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Correct Answer
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Correct Answer
verified
Under an installment sale, a customer ag...
View Answer

Correct Answer
verified
365 / 4.0 ...
View Answer

Correct Answer
verified
Its return on assets...
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Correct Answer
verified
Under the completed contract method, no ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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