Question 1

Summary data for Benedict Construction Co.'s (BCC)Job 1227,which was completed in 2016,are presented below:

Assuming BCC used the cost recovery method to recognize revenue under IFRS,what would gross profit have been in 2015 and 2016 (rounded to the nearest thousand)?

Accepted Answer

The answer of Summary data for Benedict Construction Co.'s (BCC)Job...

Question 2

In 2017,Lake would recognize realized gross profit of:

Accepted Answer

Lake would recognize realized gross profit of $300,000 in 2017 because the cost of goods sold is $400,000 and the sales revenue is $700,000.

Question 3

Assume at March 15,2015,the time of signing the contract,collection of the receivable was reasonably assured and there were no significant continuing obligations.The journal entry at signing would include a:

Accepted Answer

Since the collection of the receivable was reasonably assured and there were no significant continuing obligations, the entire franchise fee revenue of $36,000 can be recognized at the time of signing the contract.

Question 4

The amount of revenue that GAAP,regarding software revenue recognition,would require Sullivan to attribute to the software program (as opposed to the technical support)is (rounded):

Accepted Answer

The answer of The amount of revenue that GAAP,regarding software...

Question 5

Sullivan should recognize revenue for the two parts of the arrangement as follows:

Accepted Answer

The arrangement contains two elements - software program and technical support. According to GAAP, revenue should be recognized separately for each element if they have standalone value. As the software program has standalone value, its revenue should be recognized when the customer pays cash to buy the package. However, the technical support portion does not have standalone value, and its revenue should be deferred and recognized over the support period. Thus, choice B is the best option.

Question 6

Assume that Steffi signed a $50,000 installment note when she signed the franchise agreement.RS can recognize revenue associated with the $50,000:

Accepted Answer

The answer of Assume that Steffi signed a $50,000 installment...

Question 7

Assume that at the time of signing the contract,collection of the receivable was assured and that service obligations were substantial.However,by October 20,2015,substantially all continuing obligations had been met.The journal entry required at October 20,2015 would include a:

Accepted Answer

The answer of Assume that at the time of signing...

Question 8

When using the cost recovery method of accounting for long-term construction contracts under IFRS:

Accepted Answer

The answer of When using the cost recovery method of...

Question 9

In its December 31,2016,balance sheet,Lake would report:

Accepted Answer

The answer of In its December 31,2016,balance sheet,Lake would report:
...

Question 10

Assuming that the initial services to be performed by Flapper Jack's subsequent to the signing are substantial and that collection of the receivable is reasonably assured,the journal entry required at signing would include a credit to:

Accepted Answer

The initial services are substantial and collection is assured, so the entire franchise fee of $36,000 is recorded as unearned revenue until the services are performed.

Question 11

Use the following to answer questions 
Sahara Desert Homes (SDH)reports under IFRS and constructed a new subdivision during 2015 and 2016 under contract with Cactus Development Co.Relevant data are summarized below:
  SDH uses the cost recovery method under IFRS to recognize revenue.
-In its December 31,2015,balance sheet,SDH would report:

Accepted Answer

SDH uses the cost recovery method, which means revenue is only recognized once the costs of the project have been recovered. Therefore, in the first year of the project (2015), the costs would have exceeded the billing to Cactus Development Co. This creates a liability known as billings in excess of cost, which would be reported on the December 31, 2015, balance sheet.

Question 12

When using the cost recovery method of accounting for long-term construction contracts under IFRS,early in the life of the contract it is typically the case that:

Accepted Answer

The answer of When using the cost recovery method of...

Question 13

Use the following to answer questions 
Sahara Desert Homes (SDH)reports under IFRS and constructed a new subdivision during 2015 and 2016 under contract with Cactus Development Co.Relevant data are summarized below:
  SDH uses the cost recovery method under IFRS to recognize revenue.
-What is the journal entry in 2015 to record revenue?

Accepted Answer

The answer of Use the following to answer questions 
Sahara...

Question 14

The cost recovery method of accounting for long-term construction contracts under IFRS is sometimes referred to as the:

Accepted Answer

The cost recovery method, also known as the "Zero profit method," is used under IFRS for long-term construction contracts when the outcome cannot be estimated reliably. Under this method, revenue is recognized only to the extent of contract costs incurred that are expected to be recoverable, resulting in zero profit until the completion of the contract.

Question 15

In 2015,Lake would recognize realized gross profit of:

Accepted Answer

Since Lake did not sell any inventory during the year, they did not generate any gross profit.

Question 16

Use the following to answer questions 
Sahara Desert Homes (SDH)reports under IFRS and constructed a new subdivision during 2015 and 2016 under contract with Cactus Development Co.Relevant data are summarized below:
  SDH uses the cost recovery method under IFRS to recognize revenue.
-What is SDH's journal entry to record revenue in 2016?

Accepted Answer

The answer of Use the following to answer questions 
Sahara...

Question 17

Assume that Steffi paid the $50,000 in cash when she signed the agreement.RS can recognize revenue associated with the $50,000:

Accepted Answer

The answer of Assume that Steffi paid the $50,000 in...

Question 18

GAAP that covers revenue recognition for multiple-element arrangements requires that a seller recognize revenue for a particular part if:

Accepted Answer

According to GAAP for revenue recognition in multiple-element arrangements, both the criteria of the part having value on a standalone basis and customer acceptance of the part not being contingent on successful delivery of a later part must be satisfied to recognize revenue for that particular part.

Question 19

Assume that Steffi signed a $50,000 installment note when she signed the franchise agreement.RS has no experience estimating uncollectible accounts associated with these sorts of notes.RS can recognize:

Accepted Answer