Chapter 18 quiz question

Chapter 18 quiz question - QUIZ #2 - CHAPTER 18 Name:

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Unformatted text preview: QUIZ #2 - CHAPTER 18 Name: __________________________ Date: _____________ 1. The FASB concluded that if a company sells its product but gives the buyer the right to return the product, revenue from the sales transaction shall be recognized at the time of sale only if all of six conditions have been met. Which of the following is NOT one of these six conditions? A) The amount of future returns can be reasonably estimated. B) The seller's price is substantially fixed or determinable at time of sale. C) The buyer's obligation to the seller would not be changed in the event of theft or damage of the product. D) The buyer is obligated to pay the seller upon resale of the product. 2. Reese Construction Corporation contracted to construct a building for $1,500,000. Construction began in 2007 and was completed in 2008. Data relating to the contract are summarized below: Reese uses the percentage-of-completion method as the basis for income recognition. For the years ended December 31, 2007, and 2008, respectively, Reese should report gross profit of A) $270,000 and $180,000. B) $900,000 and $600,000. C) $300,000 and $150,000. D) $0 and $450,000. 3. A sale should NOT be recognized as revenue by the seller at the time of sale if A) payment was made by check. B) the selling price is less than the normal selling price. C) the buyer has a right to return the product and the amount of future returns cannot be reasonably estimated. D) none of these. Page 1 Use the following to answer question 4: Miley, Inc. began work in 2007 on a contract for $8,400,000. Other data are as follows: 2007 2008 Costs incurred to date $3,600,000 $5,600,000 Estimated costs to complete 2,400,000 — Billings to date 2,800,000 8,400,000 Collections to 2,000,000 7,200,000 date 4. If Miley uses the percentage-of-completion method, the gross profit to be recognized in 2007 is A) $1,440,000. B) $1,600,000. C) $2,160,000. D) $2,400,000. Use the following to answer question 5: During 2008, Steele Corporation sold merchandise costing $1,500,000 on an installment basis for $2,000,000. The cash receipts related to these sales were collected as follows: 2008, $800,000; 2009, $700,000; 2010, $500,000. 5. What amount would be shown in the December 31, 2009 financial statement for realized gross profit on 2008 installment sales, and deferred gross profit on 2008 installment sales, respectively? A) $175,000 and $375,000 B) $325,000 and $175,000 C) $375,000 and $125,000 D) $175,000 and 125,000 6. Continuing franchise fees should be recorded by the franchisor A) as revenue when earned and receivable from the franchisee. B) as revenue when received. C) in accordance with the accounting procedures specified in the franchise agreement. D) as revenue only after the balance of the initial franchise fee has been collected. Page 2 7. How should earned but unbilled revenues at the balance sheet date on a long-term construction contract be disclosed if the percentage-of-completion method of revenue recognition is used? A) As construction in process in the current asset section of the balance sheet. B) As construction in process in the noncurrent asset section of the balance sheet. C) As a receivable in the noncurrent asset section of the balance sheet. D) In a note to the financial statements until the customer is formally billed for the portion of work completed. 8. Dot Point, Inc. is a retailer of washers and dryers and offers a three-year service contract on each appliance sold. Although Dot Point sells the appliances on an installment basis, all service contracts are cash sales at the time of purchase by the buyer. Collections received for service contracts should be recorded as A) service revenue. B) deferred service revenue. C) a reduction in installment accounts receivable. D) a direct addition to retained earnings. 9. The revenue recognition principle provides that revenue is recognized when A) it is realized. B) it is realizable. C) it is realized or realizable and it is earned. D) none of these. 10. Neber Co., which began operations on January 1, 2007, appropriately uses the installment-sales method of accounting. The following information pertains to Neber's operations for the year 2007: Installment sales $1,200,000 Regular sales 480,000 Cost of installment sales 720,000 Cost of regular sales 288,000 General and administrative expenses 96,000 Collections on installment sales 288,000 The deferred gross profit account in Neber's December 31, 2007 balance sheet should be A) $115,200. B) $192,000. C) $364,800. D) $480,000. Page 3 ...
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This note was uploaded on 03/23/2010 for the course ACCT 120xC taught by Professor Dr.lillie during the Spring '10 term at UCLA.

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