ACC 305 WEEK 3 QUIZ 2
Follow below link to get this tutorial:
Contact us at:
ACC 305 WEEK 3 QUIZ 2
ACC 305 Week 3 Quiz 2 – STR NEW
ACC 305 Week 3 Quiz 2
TRUE-FALSE—Conceptual
1. Companies should recognize revenue
when it is realized and when cash is received.
2. Revenues are realized when a company
exchanges goods and services for cash or claims to cash.
3. Delayed recognition of revenue is
appropriate if the sale does not represent substantial completion of the
earnings process.
4. If a company sells its product but
gives the buyer the right to return it, the company should not recognize
revenue until the sale is collected.
5. Companies can recognize revenue prior
to completion and delivery of the product under certain circumstances.
6. Companies must use the
percentage-of-completion method when estimates of progress toward completion
are reasonably dependable.
7. The most popular input measure used
to determine the progress toward completion is the cost-to-cost basis.
8. If the difference between the
Construction in Process and theBillingson Construction in Process account
balances is a debit, the difference is reported as a current asset.
9. The Construction in Process account
includes only construction costs under the percentage-of-completion method.
10. Under the completed-contract method,
companies recognize revenue and costs only when the contract is completed.
11. The principal advantage of the
completed-contract method is that reported revenue reflects final results
rather than estimates.
12. Companies must recognize a loss on
an unprofitable contract under the percentage-of-completion method but not the
completed-contract method.
13. A loss in the current period on a
profitable contract must be recognized under both the percentage-of-completion
and completed-contract method.
14. Under the completion-of-production
basis, companies recognize revenue when agricul-tural crops are harvested since
the sales price is reasonably assured and no significant costs are involved in
product distribution.
15. The provision for a loss on an
unprofitable contract may be combined with the Construction in Process account
balance under percentage-of-completion but not completed-contract.
16. Under the installment-sales method,
companies defer revenue and income recognition until the period of cash
collection.
17. The installment-sales method defers
only the gross profit instead of both the sales price and cost of goods sold.
18. Deferred gross profit is generally
treated as an unearned revenue and classified as a current liability.
19. Under the cost-recovery method, a
company recognizes no revenue or profit until cash payments by the buyer exceed
the cost of the merchandise sold.
20. Companies recognize profit under the
cost-recovery method only when cash collections exceed the total cost of the
goods sold.
MULTIPLE CHOICE—Conceptual
21. 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.
22. When goods or services are exchanged
for cash or claims to cash (receivables), revenues are
a. earned.
b. realized.
c. recognized.
d. all of these.
23. When the entity has substantially
accomplished what it must do to be entitled to the benefits represented by the
revenues, revenues are
a. earned.
b. realized.
c. recognized.
d. all of these.
S24. Which of the following is not an accurate
representation concerning revenue recognition?
a. Revenue from selling products is recognized at
the date of sale, usually interpreted to mean the date of delivery to
customers.
b. Revenue from services rendered is recognized when
cash is received or when services have been performed.
c. Revenue from permitting others to use enterprise
assets is recognized as time passes or as the assets are used.
d. Revenue from disposing of assets other than
products is recognized at the date of sale.
P25. The process of formally recording or
incorporating an item in the financial statements of an entity is
a. allocation.
b. articulation.
c. realization.
d. recognition.
P26. 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.
27. Which of the following is not a reason why
revenue is recognized at time of sale?
a. Realization has occurred.
b. The sale is the critical event.
c. Title legally passes from seller to buyer.
d. All of these are reasons to recognize revenue at
time of sale.
28. An alternative available when the
seller is exposed to continued risks of ownership through return of the product
is
a. recording the sale, and accounting for returns as
they occur in future periods.
b. not recording a sale until all return privileges
have expired.
c. recording the sale, but reducing sales by an
estimate of future returns.
d. all of these.
29. 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.
30. 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.
31. In selecting an accounting method
for a newly contracted long-term construction project, the principal factor to
be considered should be
a. the terms of payment in the contract.
b. the degree to which a reliable estimate of the
costs to complete and extent of progress toward completion is practicable.
c. the method commonly used by the contractor to account
for other long-term construc-tion contracts.
d. the inherent nature of the contractor’s technical
facilities used in construction.
32. The percentage-of-completion method
must be used when certain conditions exist. Which of the following is not one of those
necessary conditions?
a. Estimates of progress toward completion,
revenues, and costs are reasonably dependable.
b. The contractor can be expected to perform the
contractual obligation.
c. The buyer can be expected to satisfy some of the
obligations under the contract.
d. The contract clearly specifies the enforceable
rights of the parties, the consideration to be exchanged, and the manner and
terms of settlement.
33. When work to be done and costs to be
incurred on a long-term contract can be estimated dependably, which of the
following methods of revenue recognition is preferable?
a. Installment-sales method
b. Percentage-of-completion method
c. Completed-contract method
d. None of these
34. How should the balances of progress
billings and construction in process be shown at reporting dates prior to the
completion of a long-term contract?
a. Progress billings as deferred income,
construction in progress as a deferred expense.
b. Progress billings as income, construction in
process as inventory.
c. Net, as a current asset if debit balance, and
current liability if credit balance.
d. Net, as income from construction if credit
balance, and loss from construction if debit balance.
35. In accounting for a long-term
construction-type contract using the percentage-of-completion method, the gross
profit recognized during the first year would be the estimated total gross
profit from the contract, multiplied by the percentage of the costs incurred
during the year to the
a. total costs incurred to date.
b. total estimated cost.
c. unbilled portion of the contract price.
d. total contract price.
36. 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.
37. The principal disadvantage of using
the percentage-of-completion method of recognizing revenue from long-term
contracts is that it
a. is unacceptable for income tax purposes.
b. gives results based upon estimates which may be
subject to considerable uncertainty.
c. is likely to assign a small amount of revenue to
a period during which much revenue was actually earned.
d. none of these.
S38. One of the more popular input
measures used to determine the progress toward completion in the
percentage-of-completion method is
a. revenue-percentage basis.
b. cost-percentage basis.
c. progress completion basis.
d. cost-to-cost basis.
S39. The principal advantage of the
completed-contract method is that
a. reported revenue is based on final results rather
than estimates of unperformed work.
b. it reflects current performance when the period
of a contract extends into more than one accounting period.
c. it is not necessary to recognize revenue at the
point of sale.
d. a greater amount of gross profit and net income
is reported than is the case when the percentage-of-completion method is used.
40. Under the completed-contract method
a. revenue, cost, and gross profit are recognized
during the production cycle.
b. revenue and cost are recognized during the
production cycle, but gross profit recognition is deferred until the contract
is completed.
c. revenue, cost, and gross profit are recognized at
the time the contract is completed.
d. none of these.
41. Cost estimates on a long-term
contract may indicate that a loss will result on completion of the entire
contract. In this case, the entire expected loss should be
a. recognized in the current period, regardless of
whether the percentage-of-completion or completed-contract method is employed.
b. recognized in the current period under the
percentage-of-completion method, but the completed-contract method should defer
recognition of the loss to the time when the contract is completed.
c. recognized in the current period under the
completed-contract method, but the percentage-of-completion method should defer
the loss until the contract is completed.
d. deferred and recognized when the contract is
completed, regardless of whether the percentage-of-completion or
completed-contract method is employed.
42. Cost estimates at the end of the
second year indicate a loss will result on completion of the entire contract.
Which of the following statements is correct?
a. Under the completed-contract method, the loss is
not recognized until the year the construction is completed.
b. Under the percentage-of-completion method, the
gross profit recognized in the first year must not be changed.
c. Under the completed-contract method, when the
billings exceed the accumulated costs, the amount of the estimated loss is
reported as a current liability.
d. Under the completed-contract method, when the
Construction in Process balance exceeds the billings, the estimated loss is
added to the accumulated costs.
43. The criteria for recognition of
revenue at the completion of production of precious metals and farm products
include
a. an established market with quoted prices.
b. low additional costs of completion and selling.
c. units are interchangeable.
d. all of these.
44. In certain cases, revenue is
recognized at the completion of production even though no sale has been made.
Which of the following statements is not true?
a. Examples involve precious metals or farm
equipment.
b. The products possess immediate marketability at
quoted prices.
c. No significant costs are involved in selling the
product.
d. All of these statements are true.
S45. For which of the following products
is it appropriate to recognize revenue at the completion of production even
though no sale has been made?
a. Automobiles
b. Large appliances
c. Single family residential units
d. Precious metals
S46. When there is a significant increase
in the estimated total contract costs but the increase does not eliminate all
profit on the contract, which of the following is correct?
a. Under both the percentage-of-completion and the
completed-contract methods, the estimated cost increase requires a current
period adjustment of excess gross profit recognized on the project in prior
periods.
b. Under the percentage-of-completion method only,
the estimated cost increase requires a current period adjustment of excess
gross profit recognized on the project in prior periods.
c. Under the completed-contract method only, the
estimated cost increase requires a current period adjustment of excess gross
profit recognized on the project in prior periods.
d. No current period adjustment is required.
47. Deferred gross profit on installment
sales is generally treated as a(n)
a. deduction from installment accounts receivable.
b. deduction from installment sales.
c. unearned revenue and classified as a current
liability.
d. deduction from gross profit on sales.
48. The installment-sales method of
recognizing profit for accounting purposes is acceptable if
a. collections in the year of sale do not exceed 30%
of the total sales price.
b. an unrealized profit account is credited.
c. collection of the sales price is not reasonably
assured.
d. the method is consistently used for all sales of
similar merchandise.
49. The method most commonly used to
report defaults and repossessions is
a. provide no basis for the repossessed asset
thereby recognizing a loss.
b. record the repossessed merchandise at fair value,
recording a gain or loss if appropriate.
c. record the repossessed merchandise at book value,
recording no gain or loss.
d. none of these.
50. Under the installment-sales method,
a. revenue, costs, and gross profit are recognized
proportionate to the cash that is received from the sale of the product.
b. gross profit is deferred proportionate to cash
uncollected from sale of the product, but total revenues and costs are
recognized at the point of sale.
c. gross profit is not recognized until the amount
of cash received exceeds the cost of the item sold.
d. revenues and costs are recognized proportionate
to the cash received from the sale of the product, but gross profit is deferred
until all cash is received.
No comments:
Post a Comment