Question

Multiple Choice Question 91

Meyer & Smith is a full-service technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Blossom Corporation purchased computer equipment, installation and training for a total cost of $179010 on March 15, 2018. Estimated standalone fair values of the equipment, installation and training are $94500, $74400 and $30000 respectively. The journal entry to record the transaction on March 15, 2018 will include a

debit to Unearned Service Revenue of $30000.

credit to Sales Revenue for $179010.

credit to Unearned Service Revenue of $27000.

credit to Service Revenue of $74400.

Multiple Choice Question 102

Wildhorse Construction is constructing an office building under contract for Cannon Company and uses the percentage-of-completion method. The contract calls for progress billings and payments of $1600000 each quarter. The total contract price is $19194000 and Wildhorse estimates total costs of $18200000. Wildhorse estimates that the building will take 3 years to complete, and commences construction on January 2, 2018.

At December 31, 2019, Wildhorse Construction estimates that it is 70% complete with the building; however, the estimate of total costs to be incurred has risen to $18450000 due to unanticipated price increases. What is reported in the balance sheet at December 31, 2019 for Wildhorse as the difference between the Construction in Process and the Billings on Construction in Process accounts, and is it a debit or a credit?

Difference between the accounts

Debit/Credit

$5758200 Credit

$115000 Debit

$635800 Debit

$635800 Credit

Multiple Choice Question 106

Ivanhoe Construction Corporation contracted to construct a building for $7540000. Construction began in 2018 and was completed in 2019. Data relating to the contract are summarized below:

	Year ended December 31,
	2018	2019
Costs incurred	$3030000	$2270000
Estimated costs to complete	2020000	0

Ivanhoe uses the percentage-of-completion method as the basis for income recognition. For the years ended December 31, 2018, and 2019, respectively, Ivanhoe should report gross profit of

$0 and $2270000.

$4510000 and $3030000.

$1344000 and $896000.

$1494000 and $746000.

Multiple Choice Question 111

Wildhorse, Inc. began work in 2018 on contract #3814, which provided for a contract price of $21225000. Other details follow:

	2018	2019
Costs incurred during the year	$3740000	$10610000
Estimated costs to complete, as of December 31	10410000	0
Billings during the year	4050000	17100000
Collections during the year	2850000	18300000

Assume that Wildhorse uses the percentage-of-completion method of accounting. The portion of the total gross profit to be recognized as income in 2018 is

$1200000.

$7075000.

$4125000.

$1870000.

Answer 1

Multiple Choice Question 91

Unearned revenue = 179010 * 30000 / ( 94500 +74400 + 30000) = 27000

So, correct option is - credit to Unearned Service Revenue of $27000.

Multiple Choice Question 102

Construction in process balance(cost and profit recognized so far)=$19,194,000×70% =$13,435,800

Billing account balance=$1,600,000×4 quarter×2 years =$12,800,000

Difference between two account=$13,435,800-$12,800,000

=$635800(Debit)

Multiple Choice Question 106

Year 2018:

Completion Percentage = 3,030,000 / (3,030,000 + 2,020,000)* 100
Completion Percentage = 60%

Gross Profit = 60% of $7,540,000 - $3,030,000
Gross Profit = $1,494,000

Year 2019:

Completion percentage = 100%

Gross Profit = $7,540,000 - $7,540,000 * 60% - $2,270,000
Gross Profit = $3,016,000 - $2,270,000
Gross Profit = $746,000

$1494000 and $746000.

Multiple Choice Question 111

Revenue recognised = [3,740,000 /(3,740,000 + 10,410,000) ] *21,225,000 = 5,610,000

Gross profit = 5,610,000 - 3,740,000 = 1,870,000