Question 1

Percentage-of-completion method Robin Builders Ltd.contracted to build a high-rise for $6,000,000.Construction began in 2014 and is expected to be completed in 2017.Data for 2014 and 2015 are:  Instructions Using the percentage-of-completion method and the cost-to-cost basis, 
a)How much gross profit should be reported for 2014? Show your calculation.
b)How much gross profit should be reported for 2015? Show your calculation.
c)Prepare the journal entry to record the revenue and gross profit for 2015.

Accepted Answer

The answer of Percentage-of-completion method Robin Builders Ltd.contracted to build...

Question 2

Bank overdrafts are generally reported as
A)a current asset.
B)a contra account.
C)a non-current asset.
D)a current liability.

Accepted Answer

A bank overdraft is a form of short-term borrowing from a bank, so it is considered a current liability on the balance sheet. It represents the amount that a company has overdrawn from its bank account and owes back to the bank.

Question 3

Completed-contract method Mockingbird Construction Ltd.reported the following construction activity in 2014, their first year of operations.  Each of the above contracts is with a different customer, and any work remaining at December 31, 2014 is expected to be completed in 2015.

Accepted Answer

The answer of Completed-contract method Mockingbird Construction Ltd.reported the following...

Question 4

Use the following information to answers questions During 2014, Horn Corp.started a construction job with a total contract price of $700,000.Horn has consistently used the completed contract method.The job was completed on December 15,
-For 2014, what amount should Horn recognize as gross profit?
A)$ 0
B)$80,000
C)$95,000
D)$125,000

Accepted Answer

Under the completed contract method, revenue and gross profit are recognized only when the contract is completed. Since the job was completed in 2015, no gross profit is recognized in 2014.

Question 5

Use the following information to answers questions During 2014, Horn Corp.started a construction job with a total contract price of $700,000.Horn has consistently used the completed contract method.The job was completed on December 15,
-Comparison of accounting methods for long-term contracts Compare the percentage-of-completion and completed-contract methods.

Accepted Answer

The answer of Use the following information to answers questions...

Question 6

Use the following information to answers questions During 2014, Horn Corp.started a construction job with a total contract price of $700,000.Horn has consistently used the completed contract method.The job was completed on December 15,
-Bundled sales Loon Inc., a software company sells new accounting software and user support bundled together.The fair value of the software is $1,500 and the fair value of the user support is $500. The user support is valid for a period of 12 months from the date of software purchase.To be able to compete with a competitor's offering, Loon decided to sell the bundle at a discount for $1,800. During its first month of sales, 100 units of this software bundle were sold at the discounted price, and expenses were $50,000. Instructions
a)Calculate the sale price that should be allocated to each component of the bundle using the
relative fair value method.
b)Calculate the sale price that should be allocated to each component of the bundle using the
residual value method.
c)Assuming that the relative fair value method is used and income tax rate is 30%, calculate
the net income applicable to Loon's first month of sales.

Accepted Answer

The answer of Use the following information to answers questions...

Question 7

Dividends and interest receivable would be classified as
A)loans receivable.
B)trade receivables.
C)notes receivable.
D)nontrade receivables.

Accepted Answer

Dividends and interest receivable are not related to normal trade or loan operations, so they are classified as nontrade receivables.

Question 8

Percentage-of-completion method Finch Construction Corp.contracted to build a bridge for $5,000,000.Construction began in 2014 and was completed in 2015.Data relating to the construction are:  Revenue Recognition 6 - 31  Instructions Using the percentage-of-completion method and the cost-to-cost basis, 
a)How much revenue should be reported for 2014? Show your calculation.
b)Prepare the journal entry to record progress billings of $1,700,000 during 2014.
c)Prepare the journal entry to record the revenue and gross profit for 2014.
d)How much gross profit should be reported for 2015? Show your calculation.

Accepted Answer

The answer of Percentage-of-completion method Finch Construction Corp.contracted to build...

Question 9

Which of the following is NOT a financial asset?
A)a contractual right to receive cash or other financial asset from another party
B)an equity instrument of another entity
C)a contractual right to exchange financial instruments with another party under potentially
Favourable conditions
D)a contractual right to pay cash or another financial asset to another party

Accepted Answer

The answer of Which of the following is NOT a...

Question 10

Contract-based approach In January 2014, McKay Construction Corp.contracted to construct a building for $6,000,000. Construction started in early 2014 and was completed in 2015.The following additional information is available:  McKay uses the percentage-of-completion method. Instructions Under the contract-based approach, 
a)How much revenue should McKay report for 2014 and 2015?
b)Prepare all journal entries for 2014 and 2015 for this contract.

Accepted Answer

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Question 11

Revenue recognition Below are several independent situations that occurred during 2014 for Lark Corporation: Situation 1: Lark entered into a consignment arrangement with Sorel Corporation.Sorel will sell the goods and retain a commission. Situation 2: Lark agreed to provide consulting services to Dodo Company, a small company with a questionable credit rating.The term of the contract is 3 years. Situation 3: Lark sold equipment that includes a one-year warranty.The individual fair values of the equipment and warranty components are readily available. Instructions For each situation, explain how revenue should be recognized under the earnings approach.Be sure to include your reasoning.

Accepted Answer

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Question 12

The portion of any demand deposit that a customer keeps as support for its existing or maturing obligations is called a(n)
A)account receivable.
B)bank overdraft.
C)compensating balance.
D)restricted cash.

Accepted Answer

The portion of a demand deposit that a customer is required to keep as support for existing or maturing obligations is called a compensating balance. It is a minimum balance that a customer is required to maintain in their account to offset the costs incurred by the bank in providing services and fulfilling obligations to the customer. Choice A (account receivable) refers to money owed to a business by its customers for goods or services provided. Choice B (bank overdraft) occurs when a bank customer withdraws more money than is available in their account. Choice D (restricted cash) refers to cash that is not available for general use and is earmarked for a specific purpose.

Question 13

Percentage-of-completion method Chickadee Construction was awarded a contract to construct an interchange at the junction of two major freeways in a Canadian city at a total contract price of $10,000,000.The estimated total costs to complete the project were $8,000,000, and it is expected to take two years. Instructions Using the percentage-of-completion method and the cost-to-cost basis,
a)Prepare the journal entry to record construction costs of $4,400,000 for the first year.
b)Prepare the journal entry to record progress billings of $5,000,000 for the first year.
c)Prepare the journal entry to recognize the revenue and gross profit for the first year.

Accepted Answer

The answer of Percentage-of-completion method Chickadee Construction was awarded a...

Question 14

Use the following information to answers questions During 2014, Horn Corp.started a construction job with a total contract price of $700,000.Horn has consistently used the completed contract method.The job was completed on December 15,
-For 2015, what amount should Horn recognize as gross profit?
A)$ 0
B)$80,000
C)$95,000
D)$125,000

Accepted Answer

Since Horn Corp uses the completed contract method, no gross profit is recognized until the job is completed. Therefore, in 2014 and prior years, no gross profit would have been recognized. In 2015, since the job was completed on December 15, the entire contract price of $700,000 would have been recognized as revenue and the costs incurred in 2015 (assuming they are less than $700,000) would have been subtracted from this amount to arrive at the gross profit. Based on the information given, we cannot calculate the exact amount of costs incurred in 2015, but we do know that the gross profit would be at least $95,000 ($700,000 - $605,000). Therefore, the best choice is C.

Question 15

Which of the following is considered as "cash" for reporting purposes?
A)money market chequing accounts
B)certificates of deposit (CDs)
C)travel advances to employees
D)postdated cheques

Accepted Answer

Money market chequing accounts are considered as cash for reporting purposes because they are highly liquid and accessible for immediate use. Certificates of deposit (CDs) are also generally considered cash equivalents, but they may have limitations on withdrawals and penalties for early withdrawal. Travel advances to employees and postdated cheques are not considered cash because they represent amounts owed or received in the future.

Question 16

Consignment sale In 2014, the following transaction occurred between Seagull Wholesale Corp.(consignor)and Bobolink Stores (consignee): On March 2, 2014 Seagull shipped merchandise costing $52,000 to Bobolink.Seagull paid $4,000 for freight and Bobolink paid $3,000 for advertising (to be reimbursed by Seagull).By the end of the third quarter of 2014 (September 30, 2014), Bobolink advised Seagull that all the merchandise has been sold for $70,000, and forwarded the proceeds (net of a 15% commission and the outlay for advertising)to Seagull. Instructions
a)Prepare all entries for Bobolink to account for this transaction.
b)Prepare all entries for Seagull to account for this transaction.

Accepted Answer

The answer of Consignment sale In 2014, the following transaction...

Question 17

Which of the following types of organizations would be most likely to have a significant amount of accounts receivable?
A)retailers and wholesalers
B)retailers and manufacturers
C)manufacturers and wholesalers
D)only retailers

Accepted Answer

The answer of Which of the following types of organizations...

Question 18

Percentage-of-completion and completed-contract methods On February 1, 2014, Owl Contractors agreed to construct a building at a total contract price of $3,000,000.Owl estimated total construction costs would be $2,000,000 and the project would be finished in 2016.Information relating to the costs and billings for this contract is as follows:  Instructions Using the percentage-of-completion the completed-contract methods, calculate the gross profit that should be reported for 2014, 2015, and 2016.Fill in the correct amounts on the following schedule:

Accepted Answer

The answer of Percentage-of-completion and completed-contract methods On February 1,...

Question 19

Revenue recognition In October 2014, Blackbird Inc.signed a contract for $30,000 with the BH Law office to provide legal services for Blackbird Inc.for the remainder of 2014 and all of 2015.Assume that BH can reliably estimate future direct costs associated with the contract.The following services were performed based on the estimate by BH:  Instructions Under the earnings approach, 
a)When should BH recognize revenue in this situation? Explain.
b)Prepare journal entries to recognize revenues related to this contract on BH's books.

Accepted Answer

The answer of Revenue recognition In October 2014, Blackbird Inc.signed...

Question 20

Which of the following actions would NOT be considered good management of accounts receivable?
A)assessing creditworthiness of new or potential customers
B)very loose or flexible credit terms to encourage sales
C)offering discounts to encourage faster payment
D)regular aged receivables analysis

Accepted Answer

Very loose or flexible credit terms can increase the risk of customers not paying on time or defaulting on their payments, which would negatively impact the business's cash flow and financial performance. Good management of accounts receivable involves balancing credit terms with creditworthiness assessments, regular aged receivables analysis, and incentives for prompt payment.

Quiz 1: Intermediate Accounting Volume 1

Bank overdrafts are generally reported as

Completed-contract method Mockingbird Construction Ltd.reported the following construction activity in 2014, their first year of operations. Each of the above contracts is with a different customer, and any work remaining at December 31, 2014 is expected to be completed in 2015.

Use the following information to answers questions During 2014, Horn Corp.started a construction job with a total contract price of $700,000.Horn has consistently used the completed contract method.The job was completed on December 15, -For 2014, what amount should Horn recognize as gross profit?

Dividends and interest receivable would be classified as

Which of the following is NOT a financial asset?

The portion of any demand deposit that a customer keeps as support for its existing or maturing obligations is called a(n)

Use the following information to answers questions During 2014, Horn Corp.started a construction job with a total contract price of $700,000.Horn has consistently used the completed contract method.The job was completed on December 15, -For 2015, what amount should Horn recognize as gross profit?

Which of the following is considered as "cash" for reporting purposes?

Which of the following types of organizations would be most likely to have a significant amount of accounts receivable?

Which of the following actions would NOT be considered good management of accounts receivable?