Question 1

Use the following information for questions:
Dudeck Construction Co.agreed to build a bridge for Genoa City.The contract specifies that construction will take three years and Dudeck will receive $12,500,000.The company expects annual costs to be $3,500,000; $2,750,000; and $1,800,000.
-Assume Dudeck uses the percentage of completion method.Revenue recognized in year three will be:

Accepted Answer

Revenue recognized in year three is $2,795,030. This is calculated by multiplying the total contract price of $12,500,000 by the percentage of completion at the end of year three, which is 22.36%.

Question 2

When should an estimated total loss on a construction project be recognized under the percentage of completion method and the completed contract method, respectively? $\begin{array} { l  }
 &\text { Percentage of completion} &\text { Completed contract}\
a. &\text {In year of discovery } &\text { In year of discovery}\
 b.&\text { Over life of contract} &\text {In year of discovery }\
c. &\text {In year of discovery } &\text { In year of completion }\
d. &\text {Over life of contract } &\text {In year of completion  }\
\end{array}$

Accepted Answer

The answer of When should an estimated total loss on...

Question 3

Use the following information for questions:
Streetside Construction agreed to build a shopping centre for $25,000,000 over the next four years.Estimated cost for years one through four are: $7,500,000; $5,000,000; $5,000,000; and $2,500,000.
-Assume total estimated costs to complete the job at the beginning of year three were revised to $27,000,000.Under the percentage of completion method, the loss for year three would be:

Accepted Answer

At the beginning of year three, the total estimated costs were revised to $27,000,000. By the end of year two, $12,500,000 ($7,500,000 + $5,000,000) had already been spent, leaving an estimated $14,500,000 ($27,000,000 - $12,500,000) to complete the project. The original contract was for $25,000,000, so the project is now expected to result in a loss of $2,000,000 ($27,000,000 - $25,000,000). By the end of year two, 46.3% of the work (based on the original estimate) was completed ($12,500,000 of $27,000,000). The loss recognized in year three is the total expected loss ($2,000,000) minus the loss recognized in previous years (0, since the loss was only identified in year three), which equals $2,000,000. However, the calculation for the percentage of completion method also involves recognizing revenue and costs proportionate to the completion level. The error in the initial explanation is in not properly applying the percentage of completion method to calculate the loss for year three, which involves recognizing the proportion of the loss based on the work completed up to that point, including adjustments for the revised estimates. The correct calculation should factor in the revenue and costs recognized up to year three, including the adjustment for the revised total cost, to determine the loss specifically attributable to year three.

Question 4

Under what condition is it possible to recognize revenue using the production method?

Accepted Answer

Revenue can be recognized using the production method when the market value of the sale is reasonably certain. This is because the production method recognizes revenue based on the progress made towards completion of the production process, and the estimated selling price of the product. If the market value of the sale is reasonably certain, then the estimated selling price can be determined with a reasonable degree of accuracy, allowing revenue to be recognized using the production method.

Question 5

An investor invested $25,000 in a company's common shares and sold it one year later for $32,500.During that year the company had average total assets of $3,750,000, average common shareholders' equity of $550,000, sales of $1,250,000 and net income of $ 125,000.The investor's ROI for the period was closest to?

Accepted Answer

The answer of An investor invested $25,000 in a company's...

Question 6

Use the following information for questions:
Streetside Construction agreed to build a shopping centre for $25,000,000 over the next four years.Estimated cost for years one through four are: $7,500,000; $5,000,000; $5,000,000; and $2,500,000.
-Assume total estimated costs to complete the job at the beginning of year three were revised to $27,000,000.If actual costs in year four were equal to those revised estimated costs, and the completed contract method were used, what would be the profit or loss recognized in year four?

Accepted Answer

Under the completed contract method, profit or loss is recognized only when the contract is completed. Since the total revised estimated costs ($27,000,000) exceed the contract price ($25,000,000), there is a total loss of $2,000,000. However, since the loss is recognized in the year the contract is completed, the profit or loss recognized in year four is $0, as the loss would have been recognized in the previous year when the revision was made.

Question 7

Use the following information for questions:
Streetside Construction agreed to build a shopping centre for $25,000,000 over the next four years.Estimated cost for years one through four are: $7,500,000; $5,000,000; $5,000,000; and $2,500,000.
-Estimated profit or loss for year one, assuming the percentage of completion method, would be:

Accepted Answer

The answer of Use the following information for questions:
Streetside Construction...

Question 8

All of the following statements are true except:

Accepted Answer

This statement is not entirely true. A company that has multiple lines of business may apply different revenue recognition policies for different types of revenue, as long as they are consistent within each separate line of business. They do not need to be consistent across all types of revenue for the entire company.

Question 9

Which of the following measures the amount of income earned per $1 invested in the company's shares?

Accepted Answer

ROE (Return on Equity) measures the amount of income earned per $1 of equity ownership in the company's shares. It is calculated by dividing the net income by the shareholder's equity. ROI (Return on Investment) measures the profitability of an investment, and is not specific to the company's shares. ROA (Return on Assets) measures the amount of income earned per $1 of assets, and also does not specifically refer to the company's shares. EPS (Earnings per Share) measures the company's earnings per outstanding share of its stock, but does not take into account the amount invested in the shares.

Question 10

A company had assets at the beginning of the year of $7,750,000 and at the end of the year of $6,750,000.During the year they reported sales of $2,750,000 net income of $275,000.What was their return on investment for the year?

Accepted Answer

Return on investment (ROI) is calculated by dividing net income by average total assets. Average total assets can be calculated by adding beginning assets and ending assets, then dividing by 2.

Average total assets = ($7,750,000 + $6,750,000) / 2 = $7,250,000

ROI = $275,000 / $7,250,000 = 0.038 or 3.8%

Therefore, the best choice is C.

Question 11

In situations where a company can not estimate the probability of collection, revenue would be recognized under the:

Accepted Answer

The instalment method is used when the probability of collection cannot be estimated. Under this method, revenue is recognized as cash is collected from the customer. This method ensures that revenue is recognized only when actual cash is received, reducing the possibility of overestimating revenue.

Quiz 4: Revenue Recognition

Under what condition is it possible to recognize revenue using the production method?

All of the following statements are true except:

Which of the following measures the amount of income earned per $1 invested in the company's shares?

A company had assets at the beginning of the year of $7,750,000 and at the end of the year of $6,750,000.During the year they reported sales of $2,750,000 net income of $275,000.What was their return on investment for the year?

In situations where a company can not estimate the probability of collection, revenue would be recognized under the: