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Exam 6: Revenue Recognition

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Question 31

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Use the following information for questions Peske Construction Co.began operations in 2010.Construction activity for 2010 is shown below.Peske uses the completed-contract method. -Which of the following should be shown on the income statement for 2010 related to Contract 1?

A) Gross profit, $180,000.
B) Gross profit, $400,000.
C) Gross profit, $420,000.
D) Gross profit, $240,000.

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Question 32

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Shore Construction Co.has consistently used the percentage-of-completion method of recognizing revenue.During 2010, Shore entered into a fixed-price contract to construct an office building for $6,000,000.Information relating to the contract is as follows: Under the earnings approach, contract costs incurred during 2011 were

A) $1,440,000.
B) $1,485,000.
C) $1,575,000.
D) $2,160,000.

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Question 33

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The concept of commercial substance in purchase and sales transactions means that

Under an earnings approach to accounting for revenues, the main focus is placed on

Lear Constructors, Ltd.has consistently used the percentage-of-completion method of recognizing income.In 2010, Lear started work on a $7,000,000 construction contract that was completed in 2011.The following information was taken from Lear's 2010 accounting records: Under the earnings approach, what amount of gross profit should Lear have recognized in 2010 on this contract?

Consider a project that was correctly accounted for under the percentage-of-completion method.At the end of the project, the construction in process account includes total debits and credits of $3.5 Mill.Assuming that gross profit of $1.2 Mill.was recognized throughout the contract, total constructions costs were:

The completed contract method for accounting for long-term construction projects

When a sale involves goods and services, the selling price should not be

On January 1, 2010, Bissel Co.sold land that cost $90,000 for $120,000, receiving a note bearing interest at 10 percent.The note will be paid in three annual instalments of $48,255 starting on December 31, 2010.Assuming that collection of the note is very uncertain, how much revenue from this sale should Bissel recognize in 2010?

List Construction Co.uses the percentage-of-completion method.In 2010, List began work on a contract for $1,650,000 and it was completed in 2011.Data on the costs are: Use the following information for questions 44 and 45: Spark Ltd.began work in 2010 on contract #731 which provided for a contract price of $2,400,000.Other details follow:

The concept of a constructive obligation in business law refers to an obligation

Berlak Company entered into a contract with Charles Corporation.Berlak agreed to provide Charles with building supplies.Charles agreed to pay a total of $18,000 at delivery.Under the contract-based view, Berlak's net contract position can be assumed to be

Which of the following is not a reason why revenue is recognized at time of sale under the earnings approach?

The new revenue recognition model currently studied by the IASB and FASB

Assume that Spark uses the completed-contract method of accounting.The portion of the total gross profit to be recognized as income in 2011 is

In selecting an accounting method for a newly contracted long-term construction project under private entity GAAP, the principal factor to be considered should be

Under both private entity GAAP and IFRS,

Malek Inc.is a retailer of home appliances and offers a service contract on each appliance sold.Elton sells appliances on instalment contracts, but all service contracts must be paid in full at the time of sale.Collections received for service contracts should be recorded as an increase in a

Use the following information for questions Peske Construction Co.began operations in 2010.Construction activity for 2010 is shown below.Peske uses the completed-contract method. -Which of the following should be shown on the balance sheet at December 31, 2010 related to Contract 2?

Losses in long-term construction projects