答案和详解如下： 21.In 2000, Able Builders, Inc. was awarded a contract to build a bridge for the City of Metropolis. A reliable estimate of the total cost of the contract was $60,000,000. The contract price was $80,000,000. All invoices were paid in cash in the year the invoice was submitted. A schedule of revenues received and costs incurred during the contract was as follows (in $ millions):
| 2001 | 2002 | 2003 | 2004 | Amount Invoiced | 10 | 30 | 30 | 10 | Costs Incurred | 12 | 22 | 21 | 5 |
Under which of the following methods of revenue recognition would Able Builders recognize the highest revenue in the year 2003? A) Cost recovery method. B) Installment sales method. C) Percentage completion method. D) Completed contract method. The correct answer was B) Under the installment sales method, revenue is recognized when the cash is received. Because Able Builders receives $30 million in cash (invoices were paid in cash in year they were submitted) $30 million in revenue is recognized. Note that the installment sales method would also result in the highest gross profit in 2003. Since costs are 75 percent of sales (60/80), costs of $22.5 million would be recognized resulting in a gross profit of $7.5 million. Under the cost recovery method, revenues are recognized only to the extent of costs incurred until all costs are collected, so revenues recognized through the end of 1999 would be ($12 + $22 =) $34 million. In 2003, not all COGS have been collected, so revenue of $21 million would be recognized to equal the costs incurred for that year. Gross profit would be $0. Under the percentage of completion method, the percentage of total costs incurred in 2003 is multiplied by the contract price, and (($21 / $60) * $80 =) $28 million is recognized. Gross profit would be ($28-$21) = $7 million. Under the completed contract method, no revenue is recognized in 2003 because all $80 million of revenue is recognized in 2004. 22.Which of the following statements regarding revenue recognition is FALSE? A) The completed contract method does not recognize revenue and expenses until the contract is completed and title is transferred. B) Revenues should be recognized when the earnings process is complete and payment is assured. C) The cost recovery method recognizes revenues at the time of sale. D) The installment sales method recognizes revenue and associated cost of goods sold only when cash is received. The correct answer was C) The cost recovery method recognizes sales when cash is received, but no gross profit is recognized until all the cost of goods sold is collected. 23.When an unreliable estimate of costs exists and ultimate payment is assured, which of the following revenue recognition methods should be used? A) Percentage-of-completion method. B) Installment sales method. C) Cost recovery method. D) Completed contract method. The correct answer was D) The key word is "unreliable." The completed contract method is used when cost estimates are unreliable. The percentage-of-completion method recognizes profit corresponding to the percentage of cost incurred to total estimated costs associated with long-term construction contracts. Percent-of-completion is used where contracts and cost estimates are reliable. The installment sales method recognizes revenue and associated cost of goods sold only when cash is received. Gross profit (sales - cost of goods sold) reflects the proportion of cash received. The cost recovery method is similar to the installment sales method but is more conservative. Sales are recognized when cash is received, but no gross profit is recognized until all of the cost of goods sold is collected. 24.When a reliable estimate of costs exists, ultimate payment is assured, and revenue is earned as costs are incurred. Which of the following revenue recognition methods should be used? A) Installment sales method. B) Completed contract method. C) Percentage-of-completion method. D) Cost recovery method. The correct answer was C) The completed contract method doesn’t recognize revenue and expense until the contract is completed and title is transferred. All profit is recognized when the contract is completed. The completed contract method is used when selling price or cost estimates are unreliable. The installment sales method recognizes revenue and associated cost of goods sold only when cash is received. Gross profit (sales – cost of goods sold) reflects the proportion of cash received. The cost recovery method is similar to the installment sales method but is more conservative. Sales are recognized when cash is received, but no gross profit is recognized until all of the cost of goods sold is collected. 25.The Kammel Building Company has a contract to build a building for $100 million. The estimate of the cost of the project is $75 million. In the first year of the project, Kammel had costs of $30 million. Kammel’s reported profit for the first year of the contract, using the completed contract method, is: A) $10 million. B) $15 million. C) $0. D) $20 million. The correct answer was C) Under the completed contract method, profit is only reported upon completion of the contract. | 
发表于 2008-4-10 10:53
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