Exam 2 (1)

Ivanhoe Corporation uses the completed-contract method. At the end of the first year of a $9013000 contract, the following information is available: Costs to date: $2025000 Estimated costs to complete 6042000 Progress billings during the year 1831000 Cash collected during the year 1517000 In the first year, Ivanhoe should recognize gross profit of $0 $946000 $314000 $236500

$0 This method requires gross profit be recognized at the end of the contract (not during).

Wildhorse Corporation reported the following information for 2021: Sales revenue $1031,000 Cost of goods sold 721,700 Operating expenses 113,410 Unrealized holding gain on AFS debt securities 41,240 Interest revenue received on AFS debt securities 4,124 For 2021, Wildhorse would report comprehensive income of $237,130 $241,254 $41,240 $200,014

$241,254 $1,031,000 - $721,700 - $113,410 + $41,240 + $4,124 = $241,254

Wildhorse Construction Company has a contract to construct a $6034000 bridge at an estimated cost of $5341000. The contract is to start in July 2022, and the bridge is to be completed in October 2024. The following data pertain to the construction period. (Note that by the end of 2023, Wildhorse has revised the estimated total cost from $5341000 to $5441000.) 2022, 2023, 2024 Costs to date- $1335250, $3808700, $5431700 Estimated costs to complete - 4005750, 1632300, 0 Progress billings during the year- 1204100, 3202400, 1627500 Cash collected during the year - 1001500, 2341400, 2691100 What amount of gross profit should Wildhorse recognize in 2023 using the percentage-of-completion method? $277900 $241850 $0 $311150

$241850 • Total estimated cost = Cost to Date+Estimate cost to complete • Estimated Gross profit = Contract Price-Total estimated cost • % of Gross Profit = Cost to Date/Total estimated cost 2023 GP = (2023 Estimated Gross profit x 2023 % of Gross Profit) - (2022 Estimated Gross profit x 2022 % of Gross Profit)

Cullumber Company enters into a contract with a customer to build a warehouse for $404500, with a performance bonus of $100400 that will be paid based on the timing of completion. The amount of the performance bonus decreases by 20% per week for every week beyond the agreed-upon completion date. The contract requirements are similar to contracts that Cullumber has performed previously, and management believes that such experience is predictive for this contract. Management estimates that there is a 50% probability that the contract will be completed by the agreed-upon completion date, a 30% probability that it will be completed 1 week late, and a 20% probability that it will be completed 2 weeks late. Determine the total probability-weighted transaction price for this revenue arrangement? $464740 $484820 $490844 $504900

$490844 • (Base+Bonus)*Probability = PR-Weight • Bonus -20% • Add all PR-Weights

For the year ended December 31, 2025, Transformers Inc. reported the following: Net income $300,000 Preferred dividends declared 50,000 Common dividend declared 10,000 Unrealized holding loss on AFS debt securities, net of tax 5,000 Retained earnings, beginning balance 400,000 Common stock 200,000 Accumulated other comprehensive income, beginning balance 25,000 What would Transformers report as the ending balance of Retained Earnings? $695,000 $665,000 $640,000 $635,000

$640,000 $400,000 + $300,000 - $50,000 - $10,000 = $640,000

Which of the following items may increase retained earnings? Net income. Changes in accounting principle. Prior period adjustments. All of these answer choices are correct.

All of these answer choices are correct.

Which of the following occur from peripheral or incidental transactions? Gain on the sale of equipment. Sales revenue. Operating expenses. Cost of goods sold.

Gain on the sale of equipment.

Which limitation of an income statement occurs when one company uses an accelerated depreciation method while another company uses straight-line depreciation? Companies omit from the income statement items they cannot measure reliably. Income measurement involves judgment. Income numbers are affected by the accounting methods employed. All of these answer choices are correct.

Income numbers are affected by the accounting methods employed.

Which of the following is not true about the information provided in the income statement? It helps in evaluating the past performance of the enterprise. It provides a basis for predicting future performance. It helps assess the risk or uncertainty of generating future cash flows. It helps in evaluating working capital.

It helps in evaluating working capital.

Where must earnings per share be disclosed in the financial statements to satisfy generally accepted accounting principles? On the face of the statement of stockholders' equity In the footnotes to the financial statements On the face of the income statement On the face of the balance sheet

On the face of the income statement

The Billings on Construction in Progress account is a(n) contract revenue account. inventory account. contra inventory account. construction expense account.

contra inventory account.

Meyer & Smith is a full-service technology company. They provide equipment, installation services as well as a full year of training (beginning on the date of purchase). Customers can purchase any product or service separately or as a bundled package. At its discretion, Container Corporation purchased computer equipment, installation, and training for a total cost of $144,000 on March 15, 2024. Estimated standalone fair values of the equipment, installation and training are $90,000, $60,000, and $30,000 respectively. The journal entry to record the transaction on March 15, 2024 will include a credit to Sales Revenue for $144,000. debit to Unearned Service Revenue of $30,000. credit to Unearned Service Revenue of $24,000. credit to Service Revenue of $60,000.

credit to Unearned Service Revenue of $24,000. The revenue for the training is not fully earned until one year after the purchase date. [$30,000/($90,000 + $60,000 + $30,000)] * $144,000 = $24,000.

The third step in the process for revenue recognition is to determine the transaction price. identify the separate performance obligations in the contract. allocate the transaction price to the separate performance obligations. recognize revenue when each performance obligation is satisfied.

determine the transaction price.

A contract should be treated as having multiple performance obligations if each service provided in the contract is interrelated. each performance obligation is not highly dependent on other promises in the contract. the contract creates enforceable rights or obligations. each service provided in the contract is interdependent.

each performance obligation is not highly dependent on other promises in the contract.

The seller of a good or service should recognize revenue when each performance obligation is satisfied. it identifies the contract with customers. it determines the transaction price. it identifies the separate performance obligations in the contract.

each performance obligation is satisfied.

Companies use intraperiod tax allocation on the income statement for only income from continuing operations. only discontinued operations. income from continuing operations and discontinued operations. neither income from continuing operations nor discontinued operations.

income from continuing operations and discontinued operations.

The gain or loss from disposal of a component of a business is shown as a (an): unusual gain or loss. prior period adjustment. expense recovery. part of discontinued operations.

part of discontinued operations.

On January 15, 2024, Bella Vista Company enters into a contract to build custom equipment for ABC Carpet Company. The contract specified a delivery date of March 1. The equipment was not delivered until March 31. The contract required full payment of $75,000, 30 days after delivery. The revenue for this contract should be recorded on January 15, 2024. recorded on March 1, 2024. recorded on March 31, 2024. recorded on April 30, 2024.

recorded on March 31, 2024.

For Mortenson Company, the following information is available: Cost of goods sold $390,000 Dividend revenue 15,000 Income tax expense 36,000 Operating expenses 138,000 Sales revenue 600,000 In Mortenson's multiple-step income statement, gross profit should not be reported. should be reported at $51,000. should be reported at $210,000. should be reported at $225,000.

should be reported at $210,000. $600,000 - $390,000 = $210,000

In determining the transaction price, the company must consider: the time value of money, but not consideration payable. variable consideration, but not non-cash consideration. non-cash consideration, but not the time value of money. variable consideration, non-cash consideration, time value of money, and consideration payable.

variable consideration, non-cash consideration, time value of money, and consideration payable.