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| 1 | |
In general, revenue is recognized as earned when there is reasonable certainty as to the collectibility of the asset to be received and: |
| | A) | The sales price has been collected. |
| | B) | The earnings process is virtually complete. |
| | C) | Production is completed. |
| | D) | A purchase order has been received. |
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| 2 | |
Under IFRS, revenue for the sale of goods is recognized when the seller has transferred to the buyer: |
| | A) | A signed invoice. |
| | B) | The risks and rewards of ownership. |
| | C) | Compelling evidence that substantive installation has occurred. |
| | D) | None of the above. |
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| 3 | |
Western Appliance Company, which began business on January 1, 2016, appropriately uses the installment sales method of accounting. The following data are available for 2016: <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025834/1074010/RevCh05_q03.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (26.0K)</a>]]>
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| | A) | a |
| | B) | b |
| | C) | c |
| | D) | d |
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| 4 | |
The Pattison Company began operations on January 2, 2016, and appropriately uses the installment sales method of accounting. The following data are available for 2016 and 2017: <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025834/1074010/RevCh05_q04.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (16.0K)</a>]]>
The deferred gross profit that would appear in the 2017 balance sheet is: |
| | A) | $180,000 |
| | B) | $200,000 |
| | C) | $285,000 |
| | D) | $225,000 |
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| 5 | |
When accounting for a long-term construction contract under IFRS, if the percentage-of-completion method is not appropriate, the seller should account for revenue using: |
| | A) | The cost recovery method. |
| | B) | The completed contract method. |
| | C) | Either the cost recovery method or the completed contract method. |
| | D) | Neither the cost recovery method or the completed contract method. |
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| 6 | |
When IFRS uses the cost recovery method to account for a long-term contract, |
| | A) | Revenue typically is recognized in excess of costs incurred early in the life of the contract. |
| | B) | Costs in excess of revenue are typically recognized early in the life of the contract. |
| | C) | Revenue equal to costs are typically recognized early in the life of the contract. |
| | D) | Revenue is based on contract completion, not on costs, early in the life of the contract. |
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| 7 | |
For profitable long-term contracts, income is recognized in each year under the: |
| | A) | Completed contract method: No; Percentage-of-completion method: No |
| | B) | Completed contract method: Yes; Percentage-of-completion method: No |
| | C) | Completed contract method: Yes; Percentage-of-completion method: Yes |
| | D) | Completed contract method: No; Percentage-of-completion method: Yes |
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| 8 | |
When accounting for a long-term construction contract using the percentage-of-completion method, gross profit recognized in any year is debited to: |
| | A) | Construction in progress. |
| | B) | Billings on construction contract. |
| | C) | Deferred income. |
| | D) | Accounts receivable. |
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| 9 | |
Hollywood Construction Company uses the percentage-of-completion method of accounting for long-term construction contracts. During 2016, Hollywood began work on a $3,000,000 fixed-fee construction contract, which was completed in 2019. The accounting records disclosed the following data at year-end: <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025834/1074010/RevCh05_q09.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (17.0K)</a>]]>
For the 2018 year, Hollywood should have recognized gross profit on this contract of: |
| | A) | $100,000 |
| | B) | $500,000 |
| | C) | $266,667 |
| | D) | $225,000 |
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| 10 | |
Sandlewood Construction Inc. uses the percentage-of-completion method of accounting for long-term construction contracts. In 2016, Sandlewood began work on a $10,000,000 construction contract, which was completed in 2017. The accounting records disclosed the following data at the end of 2016: <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025834/1074010/RevCh05_q10.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (11.0K)</a>]]>
How much gross profit should Sandlewood have recognized in 2016? |
| | A) | $700,000 |
| | B) | $1,000,000 |
| | C) | $600,000 |
| | D) | $0 |
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| 11 | |
Based on the same data in question 10, in addition to accounts receivable, what would appear in the 2016 balance sheet related to the construction accounts? |
| | A) | A current asset of $1,300,000 |
| | B) | A current liability of $900,000 |
| | C) | A current asset of $900,000 |
| | D) | A current asset of $1,900,000 |
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| 12 | |
The Simpson Construction Company uses the percentage-of-completion method of accounting for long-term construction contracts. In 2016, Simpson began work on a construction contract. Information on this contract at the end of 2016 is as follows: <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025834/1074010/RevCh05_q12.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (12.0K)</a>]]>
What is the contract price (total revenue) on this project? |
| | A) | $7,000,000 |
| | B) | $8,750,000 |
| | C) | $7,500,000 |
| | D) | $9,000,000 |
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| 13 | |
Smith Company earns a 12% return on assets. If net income is $720,000, average total assets must be: |
| | A) | $86,400 |
| | B) | $6,000,000 |
| | C) | $6,086,400 |
| | D) | $3,000,000 |
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| 14 | |
The Esquire Company reported sales of $1,600,000 and cost of goods sold of $1,122,000 for the year ended December 31, 2016. Ending inventory for 2015 and 2016 was $420,000 and $460,000, respectively. Esquire’s inventory turnover for 2016 is: |
| | A) | 2.44 |
| | B) | 2.55 |
| | C) | 3.64 |
| | D) | 3.48 |
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| 15 | |
The following data for the McQuire Corporation apply to this question: <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025834/1074010/RevCh05_q15.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (24.0K)</a>]]>
The accounts receivable turnover for 2016 is: |
| | A) | 10.0 |
| | B) | 8.33 |
| | C) | 5.2 |
| | D) | 4.33 |
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| 16 | |
The following data for the McQuire Corporation apply to this question:<![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078025834/1074010/RevCh05_q15.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (24.0K)</a>]]> The return on shareholders’ equity for 2016 is: |
| | A) | 20% |
| | B) | 8% |
| | C) | 22.22% |
| | D) | 25% |
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| 17 | |
Which of the following is an indicator that the seller is an agent with respect to a transaction? |
| | A) | The seller is primarily responsible for providing the product or service to the customer. |
| | B) | The seller lacks discretion in setting prices and identifying suppliers. |
| | C) | The seller owns inventory prior to a customer ordering it and after a customer returns it. |
| | D) | The seller holds the risk of nonpayment by customers. |
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| 18 | |
This question is based on Appendix 5.
Which of the following is not a required disclosure for interim period reporting? |
| | A) | Earnings per share. |
| | B) | Extraordinary items. |
| | C) | General and administrative expenses. |
| | D) | Sales. |
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