Practice Exam 2_Inter 1

Practice Exam 2_Inter 1 - Acc 310 Intermediate Accounting I...

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Acc 310 – Intermediate Accounting I Practice Exam 2 Problem I (50 Points Total, 2.5 Points Each) Choose the best answer for the following questions. 1. All of the following are reasons why a company may use the completed-contract method, EXCEPT: A. Total costs are too difficult to estimate. B. The company has primarily short-term contracts. C. Collection from the buyer is highly uncertain. D. The buyer’s payments will be made unevenly over the course of the project. 2. Kroon Inc. uses the percentage-of-completion method to account for its long-term construction contracts. The company reported the following for 2010: Construction revenue $ 2,000,000 Billings $ 1,500,000 Construction expense 1,200,000 Construction in process 2,000,000 Which of the following will Kroon NOT report in its 2010 financial statements related to these contracts? Account Amount Financial Statement A. Construction revenue $2,000,000 Income statement B. Construction expense $1,200,000 Income statement C. Construction in process $2,000,000 Balance sheet D. Cost and recognized profit $500,000 Balance sheet in excess of billings Page 1 of 16
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Use the following information to answer Questions 3-4. Metz Inc. had the following information related to its installment sales for 2009 and 2010: 2009 2010 Installment sales $ 2,500,000 $ 1,200,000 Cost of installment sales 1,300,000 660,000 Cash collected on 2009 installment sales 1,400,000 500,000 Cash collected on 2010 installment sales ------------ 400,000 3. What amounts will the company report on its 2009 income statement as installment sale revenue and realized gross profit? Installment Sale Revenue Realized Gross Profit A. $1,200,000 $576,000 B. $1,200,000 $624,000 C. $2,500,000 $528,000 D. $2,500,000 $672,000 4. What is Metz’s total deferred gross profit at December 31, 2010? A. $360,000 B. $420,000 C. $648,000 D. $672,000 5. A company could use all of the following revenue recognition methods under IFRS EXCEPT : A. Cost recovery method B. Percentage-of-completion method C. Completed contract method D. Installment sales method Page 2 of 16
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6. Cummings Corp. uses the cost recovery method to account for its sales. During 2007, Cummings sold goods with a cost of $200,000 for $450,000. The schedule below shows cash collections on the 2007 sales. 2007 $ 100,000 2008 150,000 2009 75,000 2010 125,000 What amount of gross profit should Cummings recognize in 2008? A. $0 B. $50,000 C. $150,000 D. $250,000 7. Penny Co. has an agreement with Goliath National Bank to maintain $500,000 in an account as a compensating balance. Given this information, which of the following statements is TRUE ? A. The amount should be reported as cash on the balance sheet if the account has checking account privileges. B.
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Practice Exam 2_Inter 1 - Acc 310 Intermediate Accounting I...

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