ACG 4101 PPT 5-7 QUESTIONS WITH
SOLUTIONS
Turp and Tyne Distillery is considering investing in a two-year project. The company's
required rate of return is 10%. The present value of $1 for one period at 10% is .909
and .826 for two periods at 10%. The project is expected to create cash flows, net of
taxes, of $240,000 in the first year, and $300,000 in the second year. The distillery
should invest in the project if the project's cost is less than or equal to: - answerc.
$465,960
The Stinch Fertilizer Corporation wants to accumulate $8,000,000 for plant expansion.
The funds are needed on January 1, 2021. Stinch intends to make five equal annual
deposits in a fund that will earn interest at 7% compounded annually. The first deposit is
to be made on January 1, 2016. Present value and future value facts are as follows: -
answera. $1,300,813
The Versa Tile Company purchased a delivery truck on February 1, 2016. The
agreement required Versa Tile to pay the purchase price of $44,000 on February 1,
2017. Assuming an 8% rate of interest, to calculate the price of the truck Versa Tile
would multiply $44,000 by the: - answerc. Present value of an ordinary annuity of $1 for
5 periods.
Turp and Tyne Distillery is considering investing in a two-year project. The company's
required rate of return is 10%. The present value of $1 for one period at 10% is .909
and .826 for two periods at 10%. The project is expected to create cash flows, net of
taxes, of $240,000 in the first year, and $300,000 in the second year. The distillery
should invest in the project if the project's cost is less than or equal to: - answerc.
$465,960
Justin Investor wants to calculate how much money he needs to deposit today into a
savings account that earns 4% in order to be able to withdraw $6,000 at the end of each
of the next 5 years. He should use which present value concept? - answerPresent value
of an ordinary annuity of $1 for 5 periods.
Which of the following is not an indicator that control of a good has passed from the
seller to the buyer? - answerc. Buyer has scheduled delivery.
Which of the following is an indicator that revenue for a service should be recognized
over time? - answera. The seller is enhancing an asset that the buyer controls as the
service is performed.
, Allen Co. wrote a contract that involves two performance obligations. Product A has a
stand-alone selling price of $100, and product B has a stand-alone selling price of $200.
The price for the combined product is $240. How much of the transaction price would be
allocated to the performance obligation for delivering product A? - answer80
Hooper Inc. offers a discount on an extended warranty on its eyePhone when the
warranty is purchased at the time the eyePhone is purchased. The warranty normally
has a price of $300, but Hooper offers it for $240 when purchased along with an
eyePhone. Hooper anticipates a 75% chance that a customer will purchase the
extended warranty along with the eyePhone. Assume Hooper sells 1,000 eyePhones
with the extended warranty discount offer. What is the total stand-alone selling price that
Hooper would use for the extended warranty discount option for purposes of allocating
revenue among the performance obligations in those 1,000 eyePhone contracts? -
answerc. $45,000
Assume Siddhi estimates variable consideration as the most likely amount. What is the
amount of revenue Siddhi would recognize for the first month of the contract? -
answerb. $2,666
Assume Siddhi estimates variable consideration as the expected value. What is the
amount of revenue Siddhi would recognize for the first month of the contract? -
answerc. $2,800
Braun Computer Company sells computers with an unconditional right to return the
computer if the customer is not satisfied. Braun has a long history selling these
computers under this returns policy and can provide precise estimates of the amount of
returns associated with each sale. Braun most likely should recognize revenue: -
answerb. When Braun delivers a computer to a customer, in an amount that is reduced
by the expected returns.
Clayton Consulting operates a website that links experienced statisticians with
businesses that need data analyzed. Statisticians post their rates, qualifications, and
references on the website, and Clayton receives 25% of the fee paid to the statisticians
in exchange for identifying potential customers. Lovelace Associates contacts Clayton
and arranges to pay a consultant $4,500 in exchange for analyzing some data.
Clayton's income statement would include the following with respect to this transaction:
- answer1125
Adam sells $100,000 of product to Bob, and also purchases $10,000 of cleaning
services from Bob. The cleaning services have a fair value of $7,000. Adam should
record revenue on its sale of product to Bob of: - answerb. $97,000.
Allen Co. wrote a contract that involves two separate performance obligations. Allen
cannot estimate the stand-alone selling price of product A. Product B has a stand-alone
selling price of $200. The price for the combined product is $240. How much of the
SOLUTIONS
Turp and Tyne Distillery is considering investing in a two-year project. The company's
required rate of return is 10%. The present value of $1 for one period at 10% is .909
and .826 for two periods at 10%. The project is expected to create cash flows, net of
taxes, of $240,000 in the first year, and $300,000 in the second year. The distillery
should invest in the project if the project's cost is less than or equal to: - answerc.
$465,960
The Stinch Fertilizer Corporation wants to accumulate $8,000,000 for plant expansion.
The funds are needed on January 1, 2021. Stinch intends to make five equal annual
deposits in a fund that will earn interest at 7% compounded annually. The first deposit is
to be made on January 1, 2016. Present value and future value facts are as follows: -
answera. $1,300,813
The Versa Tile Company purchased a delivery truck on February 1, 2016. The
agreement required Versa Tile to pay the purchase price of $44,000 on February 1,
2017. Assuming an 8% rate of interest, to calculate the price of the truck Versa Tile
would multiply $44,000 by the: - answerc. Present value of an ordinary annuity of $1 for
5 periods.
Turp and Tyne Distillery is considering investing in a two-year project. The company's
required rate of return is 10%. The present value of $1 for one period at 10% is .909
and .826 for two periods at 10%. The project is expected to create cash flows, net of
taxes, of $240,000 in the first year, and $300,000 in the second year. The distillery
should invest in the project if the project's cost is less than or equal to: - answerc.
$465,960
Justin Investor wants to calculate how much money he needs to deposit today into a
savings account that earns 4% in order to be able to withdraw $6,000 at the end of each
of the next 5 years. He should use which present value concept? - answerPresent value
of an ordinary annuity of $1 for 5 periods.
Which of the following is not an indicator that control of a good has passed from the
seller to the buyer? - answerc. Buyer has scheduled delivery.
Which of the following is an indicator that revenue for a service should be recognized
over time? - answera. The seller is enhancing an asset that the buyer controls as the
service is performed.
, Allen Co. wrote a contract that involves two performance obligations. Product A has a
stand-alone selling price of $100, and product B has a stand-alone selling price of $200.
The price for the combined product is $240. How much of the transaction price would be
allocated to the performance obligation for delivering product A? - answer80
Hooper Inc. offers a discount on an extended warranty on its eyePhone when the
warranty is purchased at the time the eyePhone is purchased. The warranty normally
has a price of $300, but Hooper offers it for $240 when purchased along with an
eyePhone. Hooper anticipates a 75% chance that a customer will purchase the
extended warranty along with the eyePhone. Assume Hooper sells 1,000 eyePhones
with the extended warranty discount offer. What is the total stand-alone selling price that
Hooper would use for the extended warranty discount option for purposes of allocating
revenue among the performance obligations in those 1,000 eyePhone contracts? -
answerc. $45,000
Assume Siddhi estimates variable consideration as the most likely amount. What is the
amount of revenue Siddhi would recognize for the first month of the contract? -
answerb. $2,666
Assume Siddhi estimates variable consideration as the expected value. What is the
amount of revenue Siddhi would recognize for the first month of the contract? -
answerc. $2,800
Braun Computer Company sells computers with an unconditional right to return the
computer if the customer is not satisfied. Braun has a long history selling these
computers under this returns policy and can provide precise estimates of the amount of
returns associated with each sale. Braun most likely should recognize revenue: -
answerb. When Braun delivers a computer to a customer, in an amount that is reduced
by the expected returns.
Clayton Consulting operates a website that links experienced statisticians with
businesses that need data analyzed. Statisticians post their rates, qualifications, and
references on the website, and Clayton receives 25% of the fee paid to the statisticians
in exchange for identifying potential customers. Lovelace Associates contacts Clayton
and arranges to pay a consultant $4,500 in exchange for analyzing some data.
Clayton's income statement would include the following with respect to this transaction:
- answer1125
Adam sells $100,000 of product to Bob, and also purchases $10,000 of cleaning
services from Bob. The cleaning services have a fair value of $7,000. Adam should
record revenue on its sale of product to Bob of: - answerb. $97,000.
Allen Co. wrote a contract that involves two separate performance obligations. Allen
cannot estimate the stand-alone selling price of product A. Product B has a stand-alone
selling price of $200. The price for the combined product is $240. How much of the
