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Enter the letter corresponding to the response that best completes each of the following statements or questions.

1
In general, revenue is recognized as earned when there is reasonable certainty as to the collectibility of the asset to be received and:
A)The sales price has been collected.
B)The earnings process is virtually complete.
C)Production is completed.
D)A purchase order has been received.
2
Western Appliance Company, which began business on January 1, 2009, appropriately uses the installment sales method of accounting. The following data are available for 2009:

Installment sales

$350,000

Cash collections on installment sales

  150,000

Gross profit on sales

    40%

The gross profit on installment sales for 2009 should be:

Realized

Deferred

A)

$60,000

$80,000

B)

$80,000

$60,000

C)

$140,000

$80,000

D)

$140,000

$60,000

3
The Pattison Company began operations on January 2, 2009, and appropriately uses the installment sales method of accounting. The following data are available for 2009 and 2010:

2009

2010

Installment sales

$600,000

$750,000

Cash collections from:

2009 sales

  200,000

  250,000

2010 sales

  300,000

Gross profit on sales

        30%

        40%


The deferred gross profit that would appear in the 2010 balance sheet is:
A)$180,000
B)$200,000
C)$285,000
D)$225,000
4
For profitable long-term contracts, income is recognized in each year under the:
A)Completed contract method: No; Percentage-of-completion method: No
B)Completed contract method: Yes; Percentage-of-completion method: No
C)Completed contract method: Yes; Percentage-of-completion method: Yes
D)Completed contract method: No; Percentage-of-completion method: Yes
5
When accounting for a long-term construction contract using the percentage-of-completion method, gross profit recognized in any year is debited to:
A)Construction in progress.
B)Billings on construction contract.
C)Deferred income.
D)Accounts receivable.
6
Hollywood Construction Company uses the percentage-of-completion method of accounting for long-term construction contracts. During 2009, Hollywood began work on a $3,000,000 fixed-fee construction contract, which was completed in 2012. The accounting records disclosed the following data at year-end:

Cumulative

Estimated

contract costs

costs to complete

incurred

at end of year

2009

$   200,000

$1,800,000

2010

  1,100,000

  1,100,000

2011

  2,000,000

     400,000

For the 2011 year, Hollywood should have recognized gross profit on this contract of:
A)$100,000
B)$500,000
C)$266,667
D)$225,000
7
Sandlewood Construction Inc. uses the percentage-of-completion method of accounting for long-term construction contracts. In 2009, Sandlewood began work on a $10,000,000 construction contract, which was completed in 2010. The accounting records disclosed the following data at the end of 2009:

Costs incurred

$5,400,000

Estimated cost to complete

  3,600,000

Progress billings

  4,100,000

Cash collections

  3,200,000

How much gross profit should Sandlewood have recognized in 2009?
A)$700,000
B)$1,000,000
C)$600,000
D)$0
8
Based on the same data in question 7, in addition to accounts receivable, what would appear in the 2009 balance sheet related to the construction accounts?
A)A current asset of $1,300,000
B)A current liability of $900,000
C)A current asset of $900,000
D)A current asset of $1,900,000
9
The Simpson Construction Company uses the percentage-of-completion method of accounting for long-term construction contracts. In 2009, Simpson began work on a construction contract. Information on this contract at the end of 2009 is as follows:

Cost incurred during the year

$1,500,000

Estimated additional cost to complete

  6,000,000

Gross profit recognized in 2009

     250,000

What is the contract price (total revenue) on this project?
A)$7,000,000
B)$8,750,000
C)$7,500,000
D)$9,000,000
10
Smith Company earns a 12% return on assets. If net income is $720,000, average total assets must be:
A)$86,400
B)$6,000,000
C)$6,086,400
D)$3,000,000
11
The Esquire Company reported sales of $1,600,000 and cost of goods sold of $1,122,000 for the year ended December 31, 2009. Ending inventory for 2008 and 2009 was $420,000 and $460,000, respectively. Esquire's inventory turnover for 2009 is:
A)2.44
B)2.55
C)3.64
D)3.48
12
The following data for the McQuire Corporation apply to questions 12 and 13:


Income statement:

        2009

Sales

$2,500,000

Cost of goods sold

  1,300,000

Net income

     200,000

Balance sheets:

     2009

     2008

Accounts receivable

$   300,000

$   200,000

Total assets

  2,000,000

  1,800,000

Total shareholders' equity

     900,000

     700,000

The accounts receivable turnover for 2009 is:
A)10.0
B)8.33
C)5.2
D)4.33
13
The return on shareholders' equity for 2009 is:
A)20%
B)8%
C)22.22%
D)25%
14
Based on Appendix 5

Which of the following is not a required disclosure for interim period reporting?
A)Earnings per share.
B)Extraordinary items.
C)General and administrative expenses.
D)Sales.





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