答案和详解如下： 1.Football Contractors, Inc. has contracted to build a stadium for the City of Washburn. The contract price is $100 million and costs are estimated at $60 million. Costs are not assured, however, because there is a material risk, which Football Contractors has assumed, that ground water problems might slow construction and increase costs by as much as $40 million. In 2004, the first year of the agreement, Football Contractors, Inc. billed $30 million, received a $20 million payment, and incurred $15 million in costs. For 2004 Football Contractors, Inc. should recognize revenue from the City of Washburn transaction in the amount of: A) $20 million. B) $25 million. C) $30 million. D) $0. The correct answer was D) The completed contract method is used when a reliable estimate of the total costs cannot be determined until the contract is finished. Because of the significant uncertainty surrounding the ground water costs, the completed contract method should be used in this transaction, and no revenue should be recognized in 2004 or any later year until the contract is completed or the cost uncertainty is resolved. 2.CPP Corporation has a contract to build a custom test chamber for a client for $100,000. CPP Corporation uses the percentage-of-completion method for accounting and estimates the total costs for the project to be equal to $80,000. CPP Corporation has promised to complete the project within three years. At year-end the customer has paid $60,000, equaling the total amount billed for the year, and total costs incurred to date are $40,000. On the income statement, net income for the year-end will be: A) $10,000. B) $20,000. C) $6,667. D) -$10,000. The correct answer was A) Under the percentage-of-completion method, one-half of the total revenue is recognized because one-half of the costs have been incurred ($40,000/$80,000). Therefore, revenue will be equal to $50,000, expenses are $40,000, and net income will be $10,000. 3.In 2006, Office Complex Construction Company (OCCC) started work on a contract with a price of $750,000. OCCC uses the percentage-of-completion method of accounting. The following are the other details about the contract for the year 2006: Costs incurred during the year | $300,000 | As of December 31 estimated costs to complete the project | 400,000 | Billings during the year | 330,000 | Cash collections during the year | 200,000 |
The gross profit that OCCC should recognize in 2006 is: A) $20,000. B) $21,429. C) $36,519. D) $50,000. The correct answer was B) Total profit on the contract = $750,000 – 700,000 = $50,000. Profits for 2006, based on extent of completion = $50,000 × (300,000 / 700,000) = $21,429. 4.The net advance billing (liability) and accounts receivable amounts that will appear on the balance sheet of OCCC as of December 31, 2006, are:
| Net Advance Billing | Accounts Receivable |
A) $8,571 $141,429 B) $8,571 $130,000 C) $36,519
$130,000 D) $36,519
$141,429 The correct answer was B) Total billings = $330,000. Construction in progress as of year-end = $750,000 × (300,000 / 700,000) = $321,429. Net advance billing = $330,000 – 321,429 = $8,571.
$330,000 (advance billing) minus $200,000 (cash collected) = $130,000. 5.In 2004, Shopwise Company (SC) began work on a construction contract for Avdo Corporation. The total contract price was of $1,000,000. SC is wondering what the financial statement effects will be if it uses the percentage-of-completion method versus the completed contract method of accounting. The following additional data are available (assume that year ends on December 31): 2004 |
| Estimated costs to complete as of December 31 | $450,000 | Costs incurred during the year | 250,000 | Billings during the year | 200,000 | Cash collections during the year | 200,000 |
Determine the gross profit SC will recognize in 2004 using the completed contract method of accounting and the percentage-of-completion method of accounting, respectively.
| Completed Contract Method | Percentage-of-Completion Method |
A) $0 $200,000 B) $83,333
$107,143 C) $0 $107,143 D) $83,333
$200,000 The correct answer was C) No interim profit is recognized in the completed contract method. However, all losses are recognized immediately.
Profit recognized in the current year using the percentage-of-completion method = $300,000 × (250,000 / 700,000) = $107,143 Note: $300,000 is the estimated total profit. |
发表于 2008-4-10 10:40
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