ACG 4101 EXAM 2 CHAPTER 5-7
FIU
Which of the following is not true about revenue recognition with
respect to long-term construction contracts?
Multiple Choice
Long-term construction contracts often are viewed as having a
single performance obligation, because goods or services fail the
"separately identifiable" criterion.
Long-term construction contracts often satisfy the criteria for
recognizing revenue over time.
Long-term construction contracts typically include multiple
performance obligations because of all the different types of goods
or services included for each project.
Long-term construction contracts require accounting for
construction in progress as well as billings to customers.
Long-term construction contracts typically include multiple
performance obligations because of all the different types of goods or
services included for each project.
Which of the following is least likely to be a reason why a long-
term construction contract would qualify for revenue recognition
over time?
Multiple Choice
The customer consumes the benefit of the seller's work as it is
performed.
,The seller is constructing an addition to property that is owned by
the customer.
The customer controls the asset as it is created.
The seller is creating an asset that has no alternative use to the
seller, and the seller has the legal right to receive payment for
progress to date.
The customer consumes the benefit of the seller's work as it is
performed.
For profitable long-term contracts, income is recognized in each
year when revenue is recognized:
At a Point in Time Upon Contract CompletionOver Time
According to Percentage of
Completiona.NoNob.YesNoc.YesYesd.NoYes
Multiple Choice
Option a
Option b
Option c
Option d
Option D
Red Co. has a long-term construction contract that qualifies for
revenue to be recognized over time. When Red is determining the
amount of income to recognize for year two, which of the
following items would Red not use in this calculation?
Multiple Choice
Actual cost to date
Revenue recognized in year one
Progress billings to date
,Total expected cost
Progress billings to date
Clement Corp., a pharmaceutical manufacturer, licensed a drug
patent to Global Corp. for royalties of 5% of drug sales. Royalties
are payable twice yearly on April 15 for sales from July through
December of the previous year and on October 15 for January -
June same-year sales. In year 8, Global paid royalties of $20,000
and $25,000 on April 15 and October 15, respectively. In response
to Global's estimate of July - December sales of the drug, Clement
correctly recognized $43,000 in royalty revenue in its financial
statements dated December 31, year 8. What was Global's sales
estimate for the second half of year 8?
$500,000
$400,000
$360,000
Cannot be determined from information given.
$360,000
On September 25, year 8 Colson Corp. sold 200,000 widgetrons to
Cavanaugh Corp at $5 per unit. Half of the units were delivered
on November 15, year 8, and the remaining 100,000 units were
delivered on January 20, year 9. At the time of sale Cavanaugh
paid 40% of the contract price and agreed to pay the rest in equal
installments on the two delivery dates. What amount of revenue
should Colson recognize from this sale in year 8?
$700,000
$500,000
$1,000,000
0$
$500,000
, Bull'sEye sells gift cards redeemable for Bull'sEye products either
in-store or online. During 2024, Bull'sEye sold $1,700,000 of gift
cards, and $1,500,000 of the gift cards were redeemed for
products. As of December 31, 2024, $144,000 of the remaining gift
cards had passed the date at which Bull'sEye concludes that the
cards will never be redeemed. How much gift card revenue should
Bull'sEye recognize in 2024?
Multiple Choice
$1,644,000
$1,500,000
$1,556,000
$1,700,000
$1,644,000
The Lao Construction Company recognizes revenue over time
according to percentage of completion for its long-term
construction contracts. In 2024, Lao began work on a
construction contract. Information on this contract at the end of
2024 is as follows:
Cost incurred during the year$ 1,500,000Estimated additional
cost to complete6,000,000Gross profit recognized in 2024250,000
What is the contract price (total revenue) on this contract?
Multiple Choice
$7,500,000
$8,750,000
$7,000,000
$9,000,000
$8,750,000
Estimated cost to complete:
12/31/2023$ 216,00012/31/20240
FIU
Which of the following is not true about revenue recognition with
respect to long-term construction contracts?
Multiple Choice
Long-term construction contracts often are viewed as having a
single performance obligation, because goods or services fail the
"separately identifiable" criterion.
Long-term construction contracts often satisfy the criteria for
recognizing revenue over time.
Long-term construction contracts typically include multiple
performance obligations because of all the different types of goods
or services included for each project.
Long-term construction contracts require accounting for
construction in progress as well as billings to customers.
Long-term construction contracts typically include multiple
performance obligations because of all the different types of goods or
services included for each project.
Which of the following is least likely to be a reason why a long-
term construction contract would qualify for revenue recognition
over time?
Multiple Choice
The customer consumes the benefit of the seller's work as it is
performed.
,The seller is constructing an addition to property that is owned by
the customer.
The customer controls the asset as it is created.
The seller is creating an asset that has no alternative use to the
seller, and the seller has the legal right to receive payment for
progress to date.
The customer consumes the benefit of the seller's work as it is
performed.
For profitable long-term contracts, income is recognized in each
year when revenue is recognized:
At a Point in Time Upon Contract CompletionOver Time
According to Percentage of
Completiona.NoNob.YesNoc.YesYesd.NoYes
Multiple Choice
Option a
Option b
Option c
Option d
Option D
Red Co. has a long-term construction contract that qualifies for
revenue to be recognized over time. When Red is determining the
amount of income to recognize for year two, which of the
following items would Red not use in this calculation?
Multiple Choice
Actual cost to date
Revenue recognized in year one
Progress billings to date
,Total expected cost
Progress billings to date
Clement Corp., a pharmaceutical manufacturer, licensed a drug
patent to Global Corp. for royalties of 5% of drug sales. Royalties
are payable twice yearly on April 15 for sales from July through
December of the previous year and on October 15 for January -
June same-year sales. In year 8, Global paid royalties of $20,000
and $25,000 on April 15 and October 15, respectively. In response
to Global's estimate of July - December sales of the drug, Clement
correctly recognized $43,000 in royalty revenue in its financial
statements dated December 31, year 8. What was Global's sales
estimate for the second half of year 8?
$500,000
$400,000
$360,000
Cannot be determined from information given.
$360,000
On September 25, year 8 Colson Corp. sold 200,000 widgetrons to
Cavanaugh Corp at $5 per unit. Half of the units were delivered
on November 15, year 8, and the remaining 100,000 units were
delivered on January 20, year 9. At the time of sale Cavanaugh
paid 40% of the contract price and agreed to pay the rest in equal
installments on the two delivery dates. What amount of revenue
should Colson recognize from this sale in year 8?
$700,000
$500,000
$1,000,000
0$
$500,000
, Bull'sEye sells gift cards redeemable for Bull'sEye products either
in-store or online. During 2024, Bull'sEye sold $1,700,000 of gift
cards, and $1,500,000 of the gift cards were redeemed for
products. As of December 31, 2024, $144,000 of the remaining gift
cards had passed the date at which Bull'sEye concludes that the
cards will never be redeemed. How much gift card revenue should
Bull'sEye recognize in 2024?
Multiple Choice
$1,644,000
$1,500,000
$1,556,000
$1,700,000
$1,644,000
The Lao Construction Company recognizes revenue over time
according to percentage of completion for its long-term
construction contracts. In 2024, Lao began work on a
construction contract. Information on this contract at the end of
2024 is as follows:
Cost incurred during the year$ 1,500,000Estimated additional
cost to complete6,000,000Gross profit recognized in 2024250,000
What is the contract price (total revenue) on this contract?
Multiple Choice
$7,500,000
$8,750,000
$7,000,000
$9,000,000
$8,750,000
Estimated cost to complete:
12/31/2023$ 216,00012/31/20240
