CCIFP Final Exam – Questions & Accurate Solutions
The Project Management Team of ABC Company has informed the CFO that a
project is running into trouble with respects to the budgeted costs for the
work. They have informed the CFO that they expect the project to sustain a
loss of 15%. The job is expected to be completed in 2 years. The company uses
the percentage of completion method to recognize income. When should the
company recognize the potential loss? Correct Answer - In full in the
year the loss was determined
Which of the following is a contract-related asset? Correct Answer -
Costs and Estimated Earnings in Excess of Billings
Which of the following is a contract-related liability? Correct Answer -
Accrued Contract Costs
What type of contract is used when one entity works under a single contract
to provide both the design of the work and the performance of the
construction services? Correct Answer - Design-build contract
What type of contracting method is also known as lump sum contract, and
provides for the contractor's performance of all work to be performed under
the contract for a stated price? Correct Answer - Fixed price contract
method
What contracting method provides for reimbursement of allowable or
otherwise defined costs incurred plus a fee for the contractor's services?
Correct Answer - Cost-plus-fee contract method
What contract method generally provides for payments to the contractor on
the basis of direct labor hours at fixed hourly rates and cost of materials or
other specified costs? Correct Answer - Time and material contract
method
What contract method is used when a contractor is paid a specified price per
each unit of output? Correct Answer - Unit price contract method
The portion of total billing that is NOT required to be paid by the owner until
certain conditions are met is known as... Correct Answer - Retention
,ABC Company hires a subcontractor to work on a project that will span over 5
years. The subcontract amount is $500,000 and is to be billed monthly to ABC
Company. Retention of 10% is to be held until the subcontractor is 75%
complete and the owner of the project has approved the release of retention.
How should ABC Company record the subcontractor retention on its records
in the first year of the project? Correct Answer - Current liability
ABC Company is preparing their monthly billing for the XYZ Owner
Development project and the following are the details of the monthly
application for payment: Total Gross Base Contract Billing $1,000,000
inclusive of $200,000 in stored material billing, and gross change order billing
of $100,000. The retention amount is 10%. What is the correct journal entry
to record the current month's application for payment? Correct Answer -
DR: Contract Receivable - $990,000
DR: Retention Receivable - $110,000
CR: Contract Revenue - $1,100,000
Step-by-Step Solution
1. Calculate the Total Billing Amount:
Gross Base Contract Billing: $1,000,000
Gross Change Order Billing: $100,000
Total Gross Billing = $1,000,000 + $100,000 = $1,100,000
2. Calculate the Retention Amount:
Retention Amount = 10% of Total Gross Billing
Retention = $1,100,000 × 10% = $110,000
3. Calculate the Contract Receivable:
Contract Receivable = Total Gross Billing - Retention
Contract Receivable = $1,100,000 - $110,000 = $990,000
ABC Company enters into a purchase order to purchase new construction
equipment from XYZ Company. The equipment has a useful life of 5 years. The
details of the purchase order are as follows:
- Equipment Cost: $500,000
- Freight Costs: $5,000
- Sales Tax: $35,000
, The company also signed a maintenance agreement for 5 years, which will be
billed separately at the rate of $10,000 plus sales tax of $700 per year.
Question: At what value should the equipment be recorded on the books of
ABC Company? Correct Answer - $540,000
Costs and estimated earnings in Excess of Billings on uncompleted contracts
are recorded on the contractor's financial statements as... Correct Answer -
A current asset
Billings in Excess of Costs and estimated earnings on uncompleted contracts
are recorded on the contractor's financial statement as... Correct Answer -
A current liability
The practice of unbalanced bidding, is referred to as... Correct Answer -
Front-end Loading
ABC Company sold a crane to XYZ Company for $100,000. The crane originally
cost $300,000, and the company had accumulated depreciation on the
equipment totaling $150,000. What is the entry that ABC Company would
make to remove the asset from its books? Correct Answer - DR. Cash
$100,000
DR. Accumulated Depreciation $150,000
DR. Loss on Sale of Equipment $50,000
CR. Fixed Asset Equipment $300,000
ABC Company had to hire a special rigger to offload the equipment at a cost of
$8,000. In addition to the rigger, they also had to procure additional property
insurance which cost them $1,500.What effect will these additional costs have
on the book value of the equipment? Correct Answer - Increase of
$8,000 to the Book Value
ABC Company enters into a purchase order to purchase new construction
equipment from XYZ Company. The equipment has a useful life of 5 years. The
details of the purchase order are as follows:
Equipment Cost: $500,000
Freight Costs: $5,000
Sales Tax: $35,000
The Project Management Team of ABC Company has informed the CFO that a
project is running into trouble with respects to the budgeted costs for the
work. They have informed the CFO that they expect the project to sustain a
loss of 15%. The job is expected to be completed in 2 years. The company uses
the percentage of completion method to recognize income. When should the
company recognize the potential loss? Correct Answer - In full in the
year the loss was determined
Which of the following is a contract-related asset? Correct Answer -
Costs and Estimated Earnings in Excess of Billings
Which of the following is a contract-related liability? Correct Answer -
Accrued Contract Costs
What type of contract is used when one entity works under a single contract
to provide both the design of the work and the performance of the
construction services? Correct Answer - Design-build contract
What type of contracting method is also known as lump sum contract, and
provides for the contractor's performance of all work to be performed under
the contract for a stated price? Correct Answer - Fixed price contract
method
What contracting method provides for reimbursement of allowable or
otherwise defined costs incurred plus a fee for the contractor's services?
Correct Answer - Cost-plus-fee contract method
What contract method generally provides for payments to the contractor on
the basis of direct labor hours at fixed hourly rates and cost of materials or
other specified costs? Correct Answer - Time and material contract
method
What contract method is used when a contractor is paid a specified price per
each unit of output? Correct Answer - Unit price contract method
The portion of total billing that is NOT required to be paid by the owner until
certain conditions are met is known as... Correct Answer - Retention
,ABC Company hires a subcontractor to work on a project that will span over 5
years. The subcontract amount is $500,000 and is to be billed monthly to ABC
Company. Retention of 10% is to be held until the subcontractor is 75%
complete and the owner of the project has approved the release of retention.
How should ABC Company record the subcontractor retention on its records
in the first year of the project? Correct Answer - Current liability
ABC Company is preparing their monthly billing for the XYZ Owner
Development project and the following are the details of the monthly
application for payment: Total Gross Base Contract Billing $1,000,000
inclusive of $200,000 in stored material billing, and gross change order billing
of $100,000. The retention amount is 10%. What is the correct journal entry
to record the current month's application for payment? Correct Answer -
DR: Contract Receivable - $990,000
DR: Retention Receivable - $110,000
CR: Contract Revenue - $1,100,000
Step-by-Step Solution
1. Calculate the Total Billing Amount:
Gross Base Contract Billing: $1,000,000
Gross Change Order Billing: $100,000
Total Gross Billing = $1,000,000 + $100,000 = $1,100,000
2. Calculate the Retention Amount:
Retention Amount = 10% of Total Gross Billing
Retention = $1,100,000 × 10% = $110,000
3. Calculate the Contract Receivable:
Contract Receivable = Total Gross Billing - Retention
Contract Receivable = $1,100,000 - $110,000 = $990,000
ABC Company enters into a purchase order to purchase new construction
equipment from XYZ Company. The equipment has a useful life of 5 years. The
details of the purchase order are as follows:
- Equipment Cost: $500,000
- Freight Costs: $5,000
- Sales Tax: $35,000
, The company also signed a maintenance agreement for 5 years, which will be
billed separately at the rate of $10,000 plus sales tax of $700 per year.
Question: At what value should the equipment be recorded on the books of
ABC Company? Correct Answer - $540,000
Costs and estimated earnings in Excess of Billings on uncompleted contracts
are recorded on the contractor's financial statements as... Correct Answer -
A current asset
Billings in Excess of Costs and estimated earnings on uncompleted contracts
are recorded on the contractor's financial statement as... Correct Answer -
A current liability
The practice of unbalanced bidding, is referred to as... Correct Answer -
Front-end Loading
ABC Company sold a crane to XYZ Company for $100,000. The crane originally
cost $300,000, and the company had accumulated depreciation on the
equipment totaling $150,000. What is the entry that ABC Company would
make to remove the asset from its books? Correct Answer - DR. Cash
$100,000
DR. Accumulated Depreciation $150,000
DR. Loss on Sale of Equipment $50,000
CR. Fixed Asset Equipment $300,000
ABC Company had to hire a special rigger to offload the equipment at a cost of
$8,000. In addition to the rigger, they also had to procure additional property
insurance which cost them $1,500.What effect will these additional costs have
on the book value of the equipment? Correct Answer - Increase of
$8,000 to the Book Value
ABC Company enters into a purchase order to purchase new construction
equipment from XYZ Company. The equipment has a useful life of 5 years. The
details of the purchase order are as follows:
Equipment Cost: $500,000
Freight Costs: $5,000
Sales Tax: $35,000
