A+ Answers of the following Questions
Question 1. 1. (TCO A) Platypus Building Inc. won a bid for a new office building contract. Below is info from the project accountant:
Total Construction Fixed Price $7,000,000
Construction Start Date March 3, 2012
Construction Complete Date December 4, 2013
As of Dec 31… 2012 2013
Actual cost incurred $2,700,000 $3,050,000
Estimated remaining costs $2,700,000 $-
Billed to customer $2,400,000 $4,600,000
Received from customer $2,000,000 $4,800,000
Assuming Platypus Building Inc. uses the completed contract method, what amount of gross profit would be recognized in 2013? (Points : 5)
$450,000
$625,000
$1,050,000
$1,250,000
2. (TCO A) Kerry Corp purchased a used bottling machine from Bob’s Bottling Inc. on Jan 1, 2012 for $2100000. Bob accounted for the sale correctly under the installment sales method. It had a book value of $1575000. Kerry paid with $300000 cash and a note for $1800000 with an annual interest of 10%. Kerry agreed to make equal annual payments of $600000. Kerry Corp made their first payment on Jan 1, 2013 of $780000 which included interest of $180000 to date of payment.
As of Dec 31, 2013 Bob has deferred gross profit of ? (Points : 5)
$255,000
$330,000
$375,000
$300,000
3. (TCO A) Blue Suede Construction Corp used the percentage-of-completion method of revenue recognition. They were contracted to build the new amphitheater for $4500000. Additional information was provided:
As of Dec 31…. 2012 2013
Percentage of completion 35% 60%
Estimated total expected costs $3,750,000 $3,900,000
Gross profit recognized (Cumulative) $225,000 $300,000
Contracted costs incurred during 2013 were… (Points : 5)
$975,000
$2,340,000
$825,000
$1,027,500
4. (TCO A) In industries with high rates of return (such as a magazine distribution company) an alternative method of revenue recognition would be… (Points : 5)
record sales net of an estimate of expected future returns
record sales in current period and returns in future periods as they occur