Assignment
1. On January 1, 2017, Fullbright Company sold goods to Blue Dirt Company for $400,000 in exchange for a 4-year, zero-interest-bearing note with a face amount of $629,406 (imputed rate of 12%). The goods have an inventory cost on Fullbright's books of $240,000. What amount of Sales Revenue should Fullbright recognize in 2017?
$240,000
$400,000
$629,406
$229,406
2. Which method of measuring the fair value of a performance obligation is dependent on the standalone selling prices of other goods or services promised in the contract?
adjusted market assessment.
standalone selling price.
expected cost plus a margin.
residual value.
3. In a bill-and-hold arrangement, which of the following is not one of the criteria which must be met for the customer to have obtained control of the product?
The product currently must be ready for physical transfer to the customer.
The seller cannot have the ability to use the product or to direct it to another customer.
The product must be physically located in the seller's warehouse.
The reason for the bill-and-hold arrangement must be substantive.
4. In a consignment sale, the consignee
recognizes both commission revenue and sales revenue.
records a payable when consigned merchandise is sold.
makes a journal entry when the consigned merchandise is received.
records advertising paid for the consignment as an expense.
5. On January 1, 2017, Purdy Company enters into a contract to transfer Blue and Rain to Georgia Co. for $300,000. The contract specifies that payment for Blue will not occur until Rain is also delivered. In other words, payment will not occur until both Blue and Rain are transferred to Georgia. Purdy determines that standalone prices are $110,000 for Blue and $190,000 for Rain. Purdy delivers Blue to Georgia on February 10, 2017. On March 15, 2017, Purdy delivers Rain to Georgia. Purdy should record
Contract Asset of $110,000 on January 1.
Accounts Receivable of $300,000 on January 1.
Contract Asset of $110,000 on February 10.
Accounts Receivable of $110,000 on February 10.
6. The Billings on Construction in Process account is reported:
in the current asset section only.
in either the current asset or current liability section.
in the current liability section only.
as a revenue on the income statement.
7. ELO Construction Co. began operations in 2017. Construction activity for 2017 is shown below. ELO uses the completed-contract method.
|
Contract
|
Contract Price
|
Billings Through 12/31/17
|
Collections Through 12/31/17
|
Costs to 12/31/17
|
Estimated Costs to Complete
|
|
1
|
$4,650,000
|
$4,450,000
|
$3,900,000
|
$3,700,000
|
-
|
|
2
|
3,600,000
|
1,800,000
|
1,600,000
|
870,000
|
$2,030,000
|
|
3
|
3,100,000
|
1,860,000
|
1,600,000
|
1,680,000
|
1,120,000
|
What amount of gross profit should be reported on the income statement for 2017?
$1,340,000
$1,480,000
$0
$950,000
8. Reedy Builders, Inc. is using the completed-contract method for a $12,400,000 contract that will take three years to complete. Data at December 31, 2017, the end of the first year, are as follows:
|
Costs incurred to date
|
$5,200,000
|
|
Estimated costs to complete
|
7,800,000
|
|
Billings to date
|
4,920,000
|
|
Collections to date
|
4,540,000
|
The gross profit or loss that should be recognized for 2017 is
a $200,000 loss.
a $240,000 loss.
$0.
a $600,000 loss.
9. Pizza Factory enters into a franchise agreement on 11/1/16 giving Mow's House the right to operate as a franchisee of Pizza Factory for 5 years. Pizza Factory prepared this entry on 11/1/16:
|
Cash
|
40,000
|
|
Notes Receivable
|
60,000
|
|
Discount on Notes Receivable
|
12,086
|
|
Unearned Franchise Revenue
|
40,000
|
|
Unearned Service Revenue (training)
|
19,914
|
|
Unearned Sales Revenue (equipment)
|
28,000
|
Pizza Factory satisfies the performance obligations related to the elements above when the franchise opens on 3/1/17. Other than interest, how much revenue should Pizza factory recognize on 3/1/17?
$ 43,957.
$ 87,914.
$100,000.
$ 0.
10. Black Bear Construction Company has a contract to construct a $6,000,000 bridge at an estimated cost of $5,300,000. The contract is to start in July 2017, and the bridge is to be completed in October 2019. The following data pertain to the construction period.
|
|
2017
|
2018
|
2019
|
|
Costs to date
|
$1,325,000
|
$3,780,000
|
$5,430,000
|
|
Estimated costs to complete
|
3,975,000
|
1,620,000
|
-
|
|
Progress billings during the year
|
1,200,000
|
3,200,000
|
1,600,000
|
|
Cash collected during the year
|
1,000,000
|
2,340,000
|
2,660,000
|
What amount of gross profit should Black Bear recognize in 2018 using the percentage-of-completion method?
$ 0
$245,000
$270,000
$315,000