187) In 2018, Cupid Construction Co. (CCC) began work on a two-year fixed price contract
project. CCC recognizes revenue over time according to percentage of completion for this
contract, and provides the following information (dollars in millions):
Accounts receivable, 12/31/2018 (from construction progress billings)
$
37.5
Actual construction costs incurred in 2018
$
135
Cash collected on project during 2018
$
105
Construction in progress, 12/31/2018
$
207
Estimated percentage of completion during 2018
60
%
How much cash remains to be collected by CCC on the project?
A) $70 million.
B) $202.5 million.
C) $240 million.
D) Cannot be determined from the given information.
188) Summary data for Benedict Construction Co.’s (BCC) Job 1227, which was completed in
2018, are presented below:
Bid price
$
450,000
Contract cost:
2017
(180,000
)
2018
(195,000
)
Gross profit:
75,000
Estimated cost to complete:
$
200,000
0
Assuming BCC recognizes revenue over time according to percentage of completion for this
contract, the gross profit recognized in 2017 would be (rounded to the nearest thousand):
A) $33,000.
B) $36,000.
C) $69,000.
D) $30,000.
189) Summary data for Benedict Construction Co.’s (BCC) Job 1227, which was completed in
2018, are presented below:
Bid price
$
450,000
Contract cost:
2017
(180,000
)
2018
(195,000
)
Gross profit:
75,000
Estimated cost to complete:
$
200,000
0
Assuming BCC recognizes revenue over time according to percentage of completion for this
contract, the gross profit recognized in 2018 would be (rounded to the nearest thousand):
A) $6,000.
B) $39,000.
C) $42,000.
D) $45,000.
190) Summary data for Benedict Construction Co.’s (BCC) Job 1227, which was completed in
2018, are presented below:
Bid price
$
450,000
Contract cost:
2017
(180,000
)
2018
(195,000
)
Gross profit:
75,000
Estimated cost to complete:
$
200,000
0
Assuming BCC recognizes revenue upon project completion, what would gross profit have been
in 2017 and 2018 (rounded to the nearest thousand)?
2017
2018
a.
$
36,000
$
39,000
b.
$
30,000
$
45,000
c.
$
70,000
$
5,000
d.
$
0
$
75,000
A) option a
B) option b
C) option c
D) option d
191) Under the realization principle, revenue should not be recognized until the earnings process
is deemed virtually complete and:
A) Revenue is realized.
B) Any receivable is collected.
C) Collection is reasonably certain.
D) Collection is absolutely assured.
192) Under IFRS, which of the following is not a condition for recognizing revenue?
A) The amount of revenue and costs associated with the transaction can be measured reliably.
B) It is reasonably possible that the economic benefits associated with the transaction will flow
to the seller.
C) For sales of goods, the seller has transferred to the buyer the risks and rewards of ownership
and doesn’t effectively manage or control the goods.
D) For sales of services, the stage of completion can be measured reliably.
193) Under IFRS, revenue for a product sale should occur when:
A) Inventory production is complete.
B) Warranty fulfillment is viewed as unlikely.
C) The seller has transferred to the buyer the risks and rewards of ownership and doesn’t
effectively manage or control the goods.
D) The buyer has paid a preponderance of installment amounts due.
194) Slick’s Used Cars sells pre-owned cars on the installment basis and carries its own notes
because its customers typically cannot qualify for a bank loan. Default rates tend to be high or
unpredictable. However, in the event of nonpayment, Slick’s can usually repossess the cars
without loss. The revenue method Slick would use is the:
A) Installment sales method.
B) Point of sales method.
C) Cost recovery method.
D) Installment sales method or cost recovery method.
195) Bert’s Meat Market sells quarters and sides of beef on the installment basis. Losses on
receivables are very difficult to predict, and meat products cannot be repossessed. The revenue
recognition method used by Bert would be:
A) Point of sale.
B) Installment sales.
C) Cost recovery.
D) Installment sales or cost recovery.
196) On December 15, 2018, Rigsby Sales Co. sold a tract of land that cost $3,600,000 for
$4,500,000. Rigsby appropriately uses the installment sales 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, 2019, and December 15, 2020. Ignore interest charges.
Rigsby has a December 31 year-end.
In 2018, Rigsby would recognize realized gross profit of:
A) $500,000.
B) $0.
C) $900,000.
D) $100,000.
197) On December 15, 2018, Rigsby Sales Co. sold a tract of land that cost $3,600,000 for
$4,500,000. Rigsby appropriately uses the installment sales 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, 2019, and December 15, 2020. Ignore interest charges.
Rigsby has a December 31 year-end.
In 2019, Rigsby would recognize realized gross profit of:
A) $0.
B) $450,000.
C) $300,000.
D) $400,000.
198) On December 15, 2018, Rigsby Sales Co. sold a tract of land that cost $3,600,000 for
$4,500,000. Rigsby appropriately uses the installment sales 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, 2019, and December 15, 2020. Ignore interest charges.
Rigsby has a December 31 year-end.
In its December 31, 2018, balance sheet, Rigsby 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.
199) On December 15, 2018, Rigsby Sales Co. sold a tract of land that cost $3,600,000 for
$4,500,000. Rigsby appropriately uses the installment sales 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, 2019, and December 15, 2020. Ignore interest charges.
Rigsby has a December 31 year-end.
At December 31, 2019, Rigsby 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 $1,600,000.
200) Reliable Enterprises sells distressed merchandise on extended credit terms. Collections on
these sales are not reasonably assured, and bad debt losses cannot be reasonably predicted. It is
unlikely that repossessed merchandise is in condition to be re-sold. Therefore, Reliable uses the
cost recovery method. Merchandise costing $30,000 was sold for $55,000 in 2017. Collections
on this sale were $20,000 in 2017, $15,000 in 2018, and $20,000 in 2019.
In 2017, Reliable would recognize gross profit of:
A) $0.
B) $25,000.
C) $8,090.
D) $8,333.
201) Reliable Enterprises sells distressed merchandise on extended credit terms. Collections on
these sales are not reasonably assured, and bad debt losses cannot be reasonably predicted. It is
unlikely that repossessed merchandise is in condition to be re-sold. Therefore, Reliable uses the
cost recovery method. Merchandise costing $30,000 was sold for $55,000 in 2017. Collections
on this sale were $20,000 in 2017, $15,000 in 2018, and $20,000 in 2019.
In 2018, Reliable would recognize gross profit of:
A) $0.
B) $6,000.
C) $5,000.
D) $10,000.
202) Reliable Enterprises sells distressed merchandise on extended credit terms. Collections on
these sales are not reasonably assured, and bad debt losses cannot be reasonably predicted. It is
unlikely that repossessed merchandise is in condition to be re-sold. Therefore, Reliable uses the
cost recovery method. Merchandise costing $30,000 was sold for $55,000 in 2017. Collections
on this sale were $20,000 in 2017, $15,000 in 2018, and $20,000 in 2019.
In 2019, Reliable would recognize gross profit of:
A) $0.
B) $6,000.
C) $8,000.
D) $20,000.
203) Reliable Enterprises sells distressed merchandise on extended credit terms. Collections on
these sales are not reasonably assured, and bad debt losses cannot be reasonably predicted. It is
unlikely that repossessed merchandise is in condition to be re-sold. Therefore, Reliable uses the
cost recovery method. Merchandise costing $30,000 was sold for $55,000 in 2017. Collections
on this sale were $20,000 in 2017, $15,000 in 2018, and $20,000 in 2019.
In its 2017 year-end balance sheet, Reliable would report installment receivables (net) of:
A) $20,000.
B) $35,000.
C) $25,909.
D) $10,000.
204) Reliable Enterprises sells distressed merchandise on extended credit terms. Collections on
these sales are not reasonably assured, and bad debt losses cannot be reasonably predicted. It is
unlikely that repossessed merchandise is in condition to be re-sold. Therefore, Reliable uses the
cost recovery method. Merchandise costing $30,000 was sold for $55,000 in 2017. Collections
on this sale were $20,000 in 2017, $15,000 in 2018, and $20,000 in 2019.
In its 2018 year-end balance sheet, Reliable would report installment receivables (net) of:
A) $0.
B) $20,000.
C) $4,000.
D) $15,000.
205) Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay
one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another
one-third each year for the next two years. Because Lake has little information about the ability
to collect these receivables, it uses the installment sales method for revenue recognition. In
2017, Lake began operations and sold jet skis with a total price of $900,000 that cost Lake
$450,000. Lake collected $300,000 in 2017, $300,000 in 2018, and $300,000 in 2019 associated
with those sales. In 2018, Lake sold jet skis with a total price of $1,500,000 that cost Lake
$900,000. Lake collected $500,000 in 2018, $400,000 in 2019, and $400,000 in 2020 associated
with those sales. In 2020, Lake also repossessed $200,000 of jet skis that were sold in 2018.
Those jet skis had a fair value of $75,000 at the time they were repossessed.
Total cash collections on installment sales during 2018 would be:
A) $700,000.
B) $300,000.
C) $800,000.
D) $0.
206) Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay
one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another
one-third each year for the next two years. Because Lake has little information about the ability
to collect these receivables, it uses the installment sales method for revenue recognition. In
2017, Lake began operations and sold jet skis with a total price of $900,000 that cost Lake
$450,000. Lake collected $300,000 in 2017, $300,000 in 2018, and $300,000 in 2019 associated
with those sales. In 2018, Lake sold jet skis with a total price of $1,500,000 that cost Lake
$900,000. Lake collected $500,000 in 2018, $400,000 in 2019, and $400,000 in 2020 associated
with those sales. In 2020, Lake also repossessed $200,000 of jet skis that were sold in 2018.
Those jet skis had a fair value of $75,000 at the time they were repossessed.
In 2017, Lake would recognize realized gross profit of:
A) $150,000.
B) $0.
C) $300,000.
D) $450,000.
207) Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay
one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another
one-third each year for the next two years. Because Lake has little information about the ability
to collect these receivables, it uses the installment sales method for revenue recognition. In
2017, Lake began operations and sold jet skis with a total price of $900,000 that cost Lake
$450,000. Lake collected $300,000 in 2017, $300,000 in 2018, and $300,000 in 2019 associated
with those sales. In 2018, Lake sold jet skis with a total price of $1,500,000 that cost Lake
$900,000. Lake collected $500,000 in 2018, $400,000 in 2019, and $400,000 in 2020 associated
with those sales. In 2020, Lake also repossessed $200,000 of jet skis that were sold in 2018.
Those jet skis had a fair value of $75,000 at the time they were repossessed.
In 2019, Lake would recognize realized gross profit of:
A) $0.
B) $450,000.
C) $310,000.
D) $700,000.
208) Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay
one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another
one-third each year for the next two years. Because Lake has little information about the ability
to collect these receivables, it uses the installment sales method for revenue recognition. In
2017, Lake began operations and sold jet skis with a total price of $900,000 that cost Lake
$450,000. Lake collected $300,000 in 2017, $300,000 in 2018, and $300,000 in 2019 associated
with those sales. In 2018, Lake sold jet skis with a total price of $1,500,000 that cost Lake
$900,000. Lake collected $500,000 in 2018, $400,000 in 2019, and $400,000 in 2020 associated
with those sales. In 2020, Lake also repossessed $200,000 of jet skis that were sold in 2018.
Those jet skis had a fair value of $75,000 at the time they were repossessed.
In its December 31, 2018, balance sheet, Lake would report:
A) Deferred gross profit of $700,000.
B) Deferred gross profit of $1,050,000.
C) Installment receivables (net) of $750,000.
D) Installment receivables (net) of $900,000.
209) Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay
one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another
one-third each year for the next two years. Because Lake has little information about the ability
to collect these receivables, it uses the installment sales method for revenue recognition. In
2017, Lake began operations and sold jet skis with a total price of $900,000 that cost Lake
$450,000. Lake collected $300,000 in 2017, $300,000 in 2018, and $300,000 in 2019 associated
with those sales. In 2018, Lake sold jet skis with a total price of $1,500,000 that cost Lake
$900,000. Lake collected $500,000 in 2018, $400,000 in 2019, and $400,000 in 2020 associated
with those sales. In 2020, Lake also repossessed $200,000 of jet skis that were sold in 2018.
Those jet skis had a fair value of $75,000 at the time they were repossessed.
In 2020, Lake would record a loss on repossession of:
A) $45,000.
B) $200,000.
C) $120,000.
D) $80,000.
210) Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay
one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another
one-third each year for the next two years. Because Lake has little information about the ability
to collect these receivables, it uses the cost recovery method to recognize revenue on these
installment sales. In 2017, Lake began operations and sold jet skis with a total price of $900,000
that cost Lake $450,000. Lake collected $300,000 in 2017, $300,000 in 2018, and $300,000 in
2019 associated with those sales. In 2018, Lake sold jet skis with a total price of $1,500,000 that
cost Lake $900,000. Lake collected $500,000 in 2018, $400,000 in 2019, and $400,000 in 2020
associated with those sales. In 2020, Lake also repossessed $200,000 of jet skis that were sold in
2018. Those jet skis had a fair value of $75,000 at the time they were repossessed.
In 2017, Lake would recognize realized gross profit of:
A) $150,000.
B) $0.
C) $300,000.
D) $450,000.
211) Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay
one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another
one-third each year for the next two years. Because Lake has little information about the ability
to collect these receivables, it uses the cost recovery method to recognize revenue on these
installment sales. In 2017, Lake began operations and sold jet skis with a total price of $900,000
that cost Lake $450,000. Lake collected $300,000 in 2017, $300,000 in 2018, and $300,000 in
2019 associated with those sales. In 2018, Lake sold jet skis with a total price of $1,500,000 that
cost Lake $900,000. Lake collected $500,000 in 2018, $400,000 in 2019, and $400,000 in 2020
associated with those sales. In 2020, Lake also repossessed $200,000 of jet skis that were sold in
2018. Those jet skis had a fair value of $75,000 at the time they were repossessed.
In 2019, Lake would recognize realized gross profit of:
A) $0.
B) $300,000.
C) $310,000.
D) $700,000.
212) Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay
one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another
one-third each year for the next two years. Because Lake has little information about the ability
to collect these receivables, it uses the cost recovery method to recognize revenue on these
installment sales. In 2017, Lake began operations and sold jet skis with a total price of $900,000
that cost Lake $450,000. Lake collected $300,000 in 2017, $300,000 in 2018, and $300,000 in
2019 associated with those sales. In 2018, Lake sold jet skis with a total price of $1,500,000 that
cost Lake $900,000. Lake collected $500,000 in 2018, $400,000 in 2019, and $400,000 in 2020
associated with those sales. In 2020, Lake also repossessed $200,000 of jet skis that were sold in
2018. Those jet skis had a fair value of $75,000 at the time they were repossessed.
In its December 31, 2018, balance sheet, Lake would report:
A) Deferred gross profit of $700,000.
B) Deferred gross profit of $600,000.
C) Installment receivables (net) of $700,000.
D) Installment receivables (net) of $400,000.