acct 253 ch 18

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wsrdpc
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acct 253 ch 18
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2010-08-04 20:14:46
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acct 253 ch 18
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  1. The revenue recognition principle states that revenue is recognized when it is
    A. earned
    B. realized and earned
    C. received
    D. realized
    B. realized and earned
    (this multiple choice question has been scrambled)
  2. Revenue from selling products is generally recognized
    A. at the point of sale
    B. at the completion of production
    C. after costs are recovered
    D. as cash is collected.
    A. at the point of sale
    (this multiple choice question has been scrambled)
  3. When a seller is exposed to continued risks of ownership through return of the product, the seller should recognize revenue
    A. at the time of sale only if 6 specific conditions are met
    B. at the time of sale and account for returns as they occur
    C. when all return privileges have expired
    D. immediately, but reduce revenue by an estimate of future returns
    A. at the time of sale only if 6 specific conditions are met
    (this multiple choice question has been scrambled)
  4. The accounting profession requires the percentage of completion method be used when
    A. the contract specifies the enforceable rights regarding goods or services to be provided and recieved by the parties
    B. the buyer can be expected to satisfy all obligations under the contract
    C. the contractor can be expected to perform the contractual obligations
    D. all of the options must exist.
    D. all of the options must exist.
    (this multiple choice question has been scrambled)
  5. The completed contract method should be used only when
    A. the conditions for using the percentage of completion method cannot e met
    B. an entity has primarily short terms contracts
    C. there are inherent hazards in the contract beyond normal, recurring business risks
    D. all of the options are correct.
    D. all of the options are correct.
    (this multiple choice question has been scrambled)
  6. A very popular measure used to determine the progress toward completion under the percentage of completion method is the
    A. efforts expended method
    B. units of work performed method
    C. cost to cost method
    D. output method
    C. cost to cost method
    (this multiple choice question has been scrambled)
  7. The billings on construction in process account is reported as
    A. a current liability only
    B. revenue on the income statement
    C. a current asset only
    D. either a current asset or current liability
    D. either a current asset or current liability
    (this multiple choice question has been scrambled)
  8. Under the completed contract method, which of the following are recorded each period during construction?
    A. all of the options
    B. costs
    C. revenues
    D. gross profit
    B. costs
    (this multiple choice question has been scrambled)
  9. A loss on an unprofitable long term contract is recognized in the current period under
    A. the percentage of completion method only
    B. the completed contract method only
    C. neither the completed contract nor the percentage of completion method
    D. both the completed contract and the percentage of completion method
    D. both the completed contract and the percentage of completion method
    (this multiple choice question has been scrambled)
  10. A loss in the current period on a contract expected to be profitable upon completion is recognized in the current period under
    A. the completed contract method only
    B. both the completed contract and percentage of completion methods
    C. the percentage of completion method only
    D. neither the completed contract nor percentage of completion methods
    C. the percentage of completion method only
    (this multiple choice question has been scrambled)
  11. Which of the following is deferred to future periods under the installment sales method?
    A. all of the options
    B. gross profit
    C. sales
    D. costs and expenses
    B. gross profit
    (this multiple choice question has been scrambled)
  12. The loss(gain) on repossession of merchandise is the difference between the estimated fair value of the merchandise and
    A. the balance of the installment receivable
    B. its original cost
    C. unrecovered cost of the merchandise
    D. the deferred gross profit
    C. unrecovered cost of the merchandise
    (this multiple choice question has been scrambled)
  13. Deferred gross profit on installment sales is generally classified as a (an)
    A. contra account
    B. current liability
    C. current asset
    D. other asset
    B. current liability
    (this multiple choice question has been scrambled)
  14. No profit is recognized until cash receipts exceed the seller's cost of the merchandise under the
    A. cost recovery method and the installment sales method
    B. cost recovery method
    C. percentage of completion method
    D. installment sales method
    B. cost recovery method
    (this multiple choice question has been scrambled)
  15. Under the cost recovery method, which of the following is reported in the period of sale?
    A. both sales and cost of goods sold
    B. gross profit
    C. sales
    D. cost of goods sold
    A. both sales and cost of goods sold
    (this multiple choice question has been scrambled)
  16. The revenue recognition principle states that revenue is recognized when it is earned and realized or realizable.
    True
  17. Revenue recognition only occurs at the point of sale.
    • False
  18. Trading loading and channel stuffing are used to overstate revenues and window dress the financial statements.
    true
  19. Under the percentage of completion method, revenue is recognized before construction is completed.
    true
  20. Under the installment sales method, gross profit is recognized in the periods that cash is received, rather than in the period of sale.
    true
  21. The completed contract method recognizes revenues, costs, and gross profit as a company makes progress toward completion on a long term contract.
    false
  22. A loss on an unprofitable contract must be recognized in full in the current period unde the completed contract method.
    true
  23. In consignment sales, the consignor uses a modified version of the sale basis of revenue recognition.
    true
  24. Companies commonly recognize revenues from manufacturing and selling activities at point of sale (usually meaning delivery).
    true
  25. Under the completed-contract method, a company accumulates construction costs plus gross profit earned to date in the construction in process inventory account
    false
  26. Which of the following transactions results in the recognition of revenue?
    a. permitting use of an asset
    b. sales of non inventoriable assets
    c. rendering a service
    d. all of the above
    d. all of the above
  27. Revenue earned from permitting others to use enterprise assets is recognized:
    A. As time passes
    B. point of sale
    C. When cash is collected
    d. None of the above
    A. As time passes
    (this multiple choice question has been scrambled)
  28. Which method recognizes revenues and gross profit eah period based upon the progress of construction?
    A. percentage of completion
    B. Completed contract
    C. completion of production
    D. cost recovery
    A. percentage of completion
    (this multiple choice question has been scrambled)
  29. When a loss occurs in the current period on a profitable long-term contract, the loss is:
    A. recognized under the completed contract method
    B. recognized under the percentage of completion method
    C. not recognized under either the completed contract method or the perentage of completion method
    D. recognized under both the completed-constract method and the percentage of completion method
    B. recognized under the percentage of completion method
    (this multiple choice question has been scrambled)
  30. Under the completion of production basis, revenue is recognized it:
    a. the sales price is reasonable assured
    b. the units produced are interchangeable
    c. no significant costs are involved in distributing the product
    d. all of the above
    d. all of the above
  31. The installment sales method is acceptable when:
    a. only a deposit has been made on the sale
    b. installment payments are being made
    c. there is no reasonable basis for estimating the collectiblility of the sale
    d. the amount received at the time of sale is less than the cost of the sale
    • c. there is no reasonable basis for estimating the collectiblility of
    • the sale
  32. Deferred gross profit on installment sales is reported on the financial statements as:
    A. a long term asset on the balance sheet
    B. other revenue on the income statement
    C. a deduction from gross profit on the income statement
    D. a current liability on the balance sheet
    D. a current liability on the balance sheet
    (this multiple choice question has been scrambled)
  33. Repossessed merchandise on an installment sale should be recorded at:
    A. fair market value
    B. net realizable value
    C. zero
    D. its original cost
    A. fair market value
    (this multiple choice question has been scrambled)
  34. Under the cost recovery method, profit is recognized only when:
    A. cash is received
    B. there are no additional costs to be incurred in recovering the total sales price
    C. cash payments received exceed the cost of goods sold
    D. there is a reasonable basis for estimating when full payment will be recieved
    C. cash payments received exceed the cost of goods sold
    (this multiple choice question has been scrambled)
  35. Under the deposit method:
    A. cash is received after the sales transaction is completed
    B. cash is not received until some event occurs in the future
    C. cash is received before the sales transaction is completed
    D. cash is received at the point of sale
    C. cash is received before the sales transaction is completed
    (this multiple choice question has been scrambled)
  36. The revenue recogniztion principle provides that revenue is recognized when
    A. it is realizable
    B. non of these
    C. it is realized
    D. it is realized or realizable and it is earned
    D. it is realized or realizable and it is earned
    (this multiple choice question has been scrambled)
  37. When goods or services are exchanged for cash or claims to cash (receivables), revenues are
    A. all of these
    B. realized
    C. recognized
    D. earned
    B. realized
    (this multiple choice question has been scrambled)
  38. When the entity has substantially accomplished what it must do to be entitled to the beneifits represented by the reveues, reveunes are
    A. earned
    B. realized
    C. recognized
    D. all of these
    A. earned
    (this multiple choice question has been scrambled)
  39. An alternative available when the seller is exposed to continued risks of ownership through return of the product is
    A. not recording a sale until all return priviledges have expired
    B. all of these
    C. recording the sale, and accounting for retursn as they occur in future periods
    D. recording the sale, but reducing sales by an estimate of future returns
    B. all of these
    (this multiple choice question has been scrambled)
  40. A sale should not be recognized as revenue by the seller at the time of sale if
    a. payment was made by check
    b. the selling price is less than the normal selling price
    c. the buyer has a right to return the product and the amount of future returns cannot be reasonably estimated
    d. none of these
    • c. the buyer has a right to return the product and the amount of future
    • returns cannot be reasonably estimated
  41. The FASB concluded that if a company sells its product but gives the buyer the right to return the product, revenue from the sales transaction shall be recognized at the time of sale only if all of 6 conditions have been meet. Which of the following is not one of these 6 conditions?
    A. The amount of future returns can be reasonably estimated
    B. the seller's price is substantially fixed or determinable at time of sale
    C. the buyer's obligation to the seller would not be changed in the event of theft or damage of the product
    D. the buyer is obligated to pay the seller upon resale of the product
    D. the buyer is obligated to pay the seller upon resale of the product
    (this multiple choice question has been scrambled)
  42. In selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be
    a. the terms of payment in the contract
    b. the degree to which a reliable estimate of the costs to complete and extent of progress toward completion is practicable
    c. the method commonly used by the contractor to account for other long-term construction contracts.
    d. the inherent nature of the contractor's technical facilities used in construction
    • b. the degree to which a reliable estimate of the costs to complete and
    • extent of progress toward completion is practicable
  43. When work to be done and costs to be incurred on a long-term contract can be estimated dependably, which of the following methods of revenue recognition is preferable?
    A. completed contract method
    B. none of these
    C. percentage of completion method
    D. installment sales method
    C. percentage of completion method
    (this multiple choice question has been scrambled)
  44. How should the balances of progress billings and construction in process be shown at reporting dates prior to the completion of a long-term contract?
    a. progress billings as deferred income, construction in progress as a deferred expense
    b. progress billings as income, construction in progress as inventory
    c. net, as a current asset if debit balance, and current liability if credit balance
    d. net, as income from construction if credit balance, and loss from construction if debit balance
    • c. net, as a current asset if debit balance, and current liability if
    • credit balance
  45. In accounting for a long-term construction type contract using the percentage of completion method, the gross profit recognized during the first year would be the estimated total gross profit from the contract, multiplied by the percentage of the cots incurred during the year ot the
    A. total contract price
    B. total estimated cost
    C. total costs incurred to date
    D. unbilled portion of the contract price
    B. total estimated cost
    (this multiple choice question has been scrambled)
  46. How should earned but unbilled revenues at the balance sheet date on a long-term construction contract be disclosed if the percentae of completion method of revenue recognition is used
    a. as construction in process in the current asset section of the balance sheet
    b. as construction in process in the noncurrent asset section of the balance sheet
    c. as a receivable in the noncurrent asset section of the balance sheet
    d. in a note to the financial statemetns until the customer is formally billed for the portion of work completed
    • a. as construction in process in the current asset section of the
    • balance sheet
  47. The principal disadvantage of using the percentage of completion method of recognizing revenue from long term contracts is that it
    a. is unacceptable for income tax purposed
    b. gives results based upon estimates which may be subject to considerable uncertainty
    c. is likely to assign a small amount of revenue to a period during which revenue was actually earned
    d. none of these
    • b. gives results based upon estimates which may be subject to
    • considerable uncertainty
  48. The principal advantage of the completed contract method is that
    a. reported revenue is based on final results rather than estimates of unperformed work
    b. it reflects current performance when the period of a contract extends into more than one accounting period
    c. it is not necessary to recognize revenue at the point of sale
    d. a greater amount of gross profit and net income is reported than is the case when the percentage of completion method is used
    • a. reported revenue is based on final results rather than estimates of
    • unperformed work
  49. Under the completed contract method
    a. revenue, cost and gross profit are recognized during the production cycle
    b. revenue and cost are recognized during the production cycle, but gross profit recognition is deferred until the contract is completed
    c. revenue, cost and gross profit are recognized at the time the contract is completed
    d. none of these
    • c. revenue, cost and gross profit are recognized at the time the
    • contract is completed
  50. Cost estimates on a long term contract may indicate that a loss will result on completion of the entire contract. In this case, the entire expected loss should be
    a. recognized in the current period, regardless of whether the percentage of completion or completed contract method is employed
    b. recognized in the currect periodunder the percentage of completion method, but the completed contract method should defer recognition of the loss to the time when the contract is completed
    c. recognized in the current period under the completed contract method, but the percentage of completion method should defer the loss until the contract is completed
    d. deferred and recognized when the contract is completed, regardless of whether the percentage of completion or completd contract method is employed
    • a. recognized in the current period, regardless of whether the
    • percentage of completion or completed contract method is employed
  51. Deferred gross profit on installment sales is generally treated as a(n)
    A. deduction from installment accounts receivable
    B. unearned revenue and classified as a current liability
    C. deduction from installment sales
    D. deduction from gross profit on sales
    B. unearned revenue and classified as a current liability
    (this multiple choice question has been scrambled)
  52. The installment sales method of recognizing profit for accounting purpose is acceptable if
    A. an unrealized profit account is created
    B. collection of the sales price is not reasonable assured
    C. collections in the year of sale do not exceed 30% of the total sales price
    D. the method is consistently used for all sales of similar merchandise
    B. collection of the sales price is not reasonable assured
    (this multiple choice question has been scrambled)
  53. Under the installment sales method
    a. revenue, costs and gross profit are recognized porportionate to the cash that is received from the sale of the product
    b. gross profit is deferred proportionate to cash uncollected from sale of the product, but total revenues and costs are recognized at the point of sale
    c. gross profit is not recognized until the amount of cash received exceeds the cost of the item sold
    d. revenues and costs are recognized proportionate to the cash received from the sale of the product, but gross profit is deferred until all cash is recieved.
    • b. gross profit is deferred proportionate to cash uncollected from sale
    • of the product, but total revenues and costs are recognized at the point
    • of sale
  54. Revenue is recognized by the consignor when the
    A. goods are shipped to the consignee
    B. consignor receives an account sales from the consignee
    C. consignor receives an advance from the consignee
    D. consignee receives the goods
    B. consignor receives an account sales from the consignee
    (this multiple choice question has been scrambled)

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