CCIFP – Questions With Definitive Solutions
AICPA
CAP Correct Answer - Committee on Accounting Procedure - first body
to establish standards of financial accounting and reporting
FASB Correct Answer - Financial Accounting Standards Board
GAAP Correct Answer - Generally Accepted Accounting Principles
The AICPA requires the percentage of completion method unless Correct
Answer - the client cannot properly estimate or if completed contract is
materially consistent
Cash Basis, Accrual Billing, or other hybrids are not acceptable for recognizing
income on financials statements according to Correct Answer - GAAP
If the estimated total cost changes significantly upward Correct Answer -
the % of completion will be overstate in the earlier periods of the contract
A more precise estimate of total cost results in Correct Answer - a more
precise measurement of % of completion
Commonly used in the efforts method Correct Answer - incurred labor
hours
Labor hours incurred to date and Total expected labor hours should include
Correct Answer - Direct, indirect, and subcontractor labor
When is the output method typically used Correct Answer - If there is
uniformity of output and each unit is identical and the cost per unit is
standardized
Revenue Cost Approach Correct Answer - Alternative A
Gross Profit Approach Correct Answer - Alternative B
, Revenue under Alternative B is calculated as the Correct Answer - sum
of the cost incurred to date plus the gross profit earned to date
Alternative A is commonly used when the % of completion is determined by
Correct Answer - inputs other than total cost, outputs, or other estimates
of physical completion
Alternative A requires that computations for any period be calculated by
multiplying the percentage of completion by contract revenues and cost
Correct Answer - adjusted for revisions in estimates when they become
known
Revenue Cost Approach Calculation Correct Answer - 1. compute % of
completion
2. Multiply % by total revenues
3. Multiply % by total cost
4. Subtract cost from revenue to derive GP
5. Subtract revenue and cost recognized in previous periods
*** The total cost to complete has changed
6. Recompute the % of completion
7. Compute the earned revenue (multiply the % of completion by contract
price and subtract revenue previously recognized)
8. Compute the contract cost (multiply the % of completion by total estimated
contract cost and subtract cost previously recognized
9. Compute the recognized gross profit by subtracting the cost recognized
from the revenue earned
Gross Profit Approach Calculation Correct Answer - 1. compute % of
completion
2. Estimate the contract gross profit using the total estimated contract
revenue and cost
3. Multiply the % of completion by the estimated GP
4. Subtract any GP previously recognized
5. Add the GP for the period to the cost incurred
for the period to determine the contract revenue
*** The total cost to complete has changed
AICPA
CAP Correct Answer - Committee on Accounting Procedure - first body
to establish standards of financial accounting and reporting
FASB Correct Answer - Financial Accounting Standards Board
GAAP Correct Answer - Generally Accepted Accounting Principles
The AICPA requires the percentage of completion method unless Correct
Answer - the client cannot properly estimate or if completed contract is
materially consistent
Cash Basis, Accrual Billing, or other hybrids are not acceptable for recognizing
income on financials statements according to Correct Answer - GAAP
If the estimated total cost changes significantly upward Correct Answer -
the % of completion will be overstate in the earlier periods of the contract
A more precise estimate of total cost results in Correct Answer - a more
precise measurement of % of completion
Commonly used in the efforts method Correct Answer - incurred labor
hours
Labor hours incurred to date and Total expected labor hours should include
Correct Answer - Direct, indirect, and subcontractor labor
When is the output method typically used Correct Answer - If there is
uniformity of output and each unit is identical and the cost per unit is
standardized
Revenue Cost Approach Correct Answer - Alternative A
Gross Profit Approach Correct Answer - Alternative B
, Revenue under Alternative B is calculated as the Correct Answer - sum
of the cost incurred to date plus the gross profit earned to date
Alternative A is commonly used when the % of completion is determined by
Correct Answer - inputs other than total cost, outputs, or other estimates
of physical completion
Alternative A requires that computations for any period be calculated by
multiplying the percentage of completion by contract revenues and cost
Correct Answer - adjusted for revisions in estimates when they become
known
Revenue Cost Approach Calculation Correct Answer - 1. compute % of
completion
2. Multiply % by total revenues
3. Multiply % by total cost
4. Subtract cost from revenue to derive GP
5. Subtract revenue and cost recognized in previous periods
*** The total cost to complete has changed
6. Recompute the % of completion
7. Compute the earned revenue (multiply the % of completion by contract
price and subtract revenue previously recognized)
8. Compute the contract cost (multiply the % of completion by total estimated
contract cost and subtract cost previously recognized
9. Compute the recognized gross profit by subtracting the cost recognized
from the revenue earned
Gross Profit Approach Calculation Correct Answer - 1. compute % of
completion
2. Estimate the contract gross profit using the total estimated contract
revenue and cost
3. Multiply the % of completion by the estimated GP
4. Subtract any GP previously recognized
5. Add the GP for the period to the cost incurred
for the period to determine the contract revenue
*** The total cost to complete has changed
