1. Indiana Co. start construction project in 2008 which will give it $150 million when it is completed in 2010. In 2008, Indiana incurred $36 million of costs and evaluates additional $84 million of costs to complete project. Using the percentage-of-completion method, Indiana:
a. Recognized no gross profit or loss on project in 2008.
b. Recognized $6 million loss on the project in 2008.
c. Recognized $9 million gross profit on the project in 2008.
d. Recognized $36 million loss on the project in 2008.
2. On December 15, 2008, Rigby Sales Co. sold tract of land that cost $3,600,000 for $4,500,000. Rigby suitably uses installment sale method of accounting for this transaction. Terms called for down payment of $500,000 with balance in two equal annual installments payable on December 15, 2009, and December 15, 2010. Ignore interest charges. Rigby has a December 31 year-end. In 2008, Rigby would identify realized gross profit of:
a. $500,000.
b. $0.
c. $900,000.
d. $100,000.
3. On December 15, 2008, Rigby Sales Co. sold tract of land which cost $3,600,000 for $4,500,000. Rigby suitably uses installment sale method of accounting for this transaction. Terms called for down payment of $500,000 with the balance in two equal annual installments payable on December 15, 2009, and December 15, 2010. Ignore interest charges. Rigby has a December 31 year-end. In 2009, Rigby would identify realized gross profit of:
a. $0.
b. $450,000.
c. $300,000.
d. $400,000.
4. On December 15, 2008, Rigby Sales Co. sold tract of land which cost $3,600,000 for $4,500,000. Rigby suitably uses the installment sale method of accounting for this transaction. Terms called for a down payment of $500,000 with the balance in two equal annual installments payable on December 15, 2009, and December 15, 2010. Ignore interest charges. Rigby has a December 31 year-end. In its December 31, 2008, balance sheet, Rigby would report:
a. Realized gross profit of $100,000.
b. Deferred gross profit of $100,000.
c. Installment receivables (net) of $3,200,000.
d. Installment receivables (net) of 4,000,000.
5. On December 15, 2008, Rigby Sales Co. sold a tract of land that cost $3,600,000 for $4,500,000. Rigby suitably uses installment sale method of accounting for this transaction. Terms called for a down payment of $500,000 with balance in two equal annual installments payable on December 15, 2009, and December 15, 2010. Ignore interest charges. Rigby has a December 31 year-end. At December 31, 2009, Rigby would report in its balance sheet:
a. Realized gross profit of $500,000.
b. Deferred gross profit of $400,000.
c. Realized gross profit of $400,000.
d. Cost of installment sales of $1,600,000.