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c. Under the double-entry approach, each transaction must be recorded with one debit and onecredit of equal dollar amounts.d. Special-purpose financial information for a specific decision, such as whether or not topurchase a new machine, is best obtained from the detailed accounting records rather than fromthe financial statements.Which of the following statements is true?
a. All assets are carried indefinitely at their original costs in the financial statements.b. Liabilities are measured in the cash to be paid or the value of services to be performed tosatisfy the liabilities.c. Accounting principles are derived by merely summarizing accounting practices used to date.d. Accountants can easily measure all changes in assets and liabilities since they never involveestimates or calculations.Which of the following statements is false?a. The exchange-price principle is also called the cost principle.b. The matching principle is closely related to the revenue recognition principle.c. The installment sales method recognizes revenue sooner than it would normally berecognized.d. The percentage-of-completion method recognizes revenue sooner than the completed-contract method.Alternate problem B Nevada Real Estate Sales Company sells lots in its development in DryCreek Canyon under terms calling for small cash down payments with monthly installmentpayments spread over a few years. Following are data on the company's operations for its firstthree years:200820092010Gross margin rate ...........................45%48%50%Cash collected in 2010 fromsales of lots made in.....................$640,000$800,000$900,000The total selling price of the lots sold in 2010 was USD 3,000,000, while general andadministrative expenses (which are not included in the costs used to determine gross margin) wereUSD 800,000.a. Compute net income for 2010 assuming revenue is recognized on the sale of a lot.b. Compute net income for 2010 assuming use of the installment basis of accounting for salesand gross margin.Alternate problem C The following contract prices and costs relate to all of OrlandoConstruction Company's long-term construction projects (in millions of dollars):Costs IncurredCost to BeContractPrior toInIncurred inPrice20102010Future YearsOn projects completed in 2010$46$4$36$0On incomplete projects144244848General and administrative expenses for 2010 amounted to USD 1,200,000. Assume that thegeneral and administrative expenses are not to be treated as a part of the construction cost.a. Compute net income for 2010 using the completed-contract method.b. Compute net income for 2010 using the percentage-of-completion method.Alternate problem D In each of these circumstances, the accounting practices may bequestioned. Indicate whether you agree or disagree with the accounting practice employed andstate the assumptions, concepts, or principles that justify your position.