Question

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1. installment sales for 2018 is $600,000 and cost of goods sold $300,000 while the installment sales in 2019 is $1,000,000 and cost of goods sold $800,000, cash collection from 2018 sales was $400,000 in 2018 and $200,000 in 2019, cash collection from 2019 sales was $500,000 in 2019 and $500,000 in 2020, using installment sales method compute gross profit rate for two years sales?

a.

2018 is 50% and 2019 is 20%.

b.

2018 is 20% and 2019 is 50%.

c.

2018 is 50% and 2019 is 50%.

d.

2018 is 20% and2019 is 20%.

2. Imar Construction company signed a contract to build new bridge at a contract price of $5,000,000 and total estimated cost of $4,000,000 the project will be completed within 4 years, the cost incurred to date for each period is, first year $1,000,000- second year $2,500,000- third year $3,200,000 and fourth year $4,100,000 while the estimasted cost to,complete the project for each each period is, first year $3,000,000- second year $1,700,000- third year $1,000,000 and fourth year is $0, based on above question and using Cost recover method, what is the gross profit recognized in second year?

a.

$226,190.

b.

$476,190.

c.

$250,000.

d.

0

3. installment sales for 2018 is $600,000 and cost of goods sold $300,000 while the installment sales in 2019 is $1,000,000 and cost of goods sold $800,000, cash collection from 2018 sales was $400,000 in 2018 and $200,000 in 2019, cash collection from 2019 sales was $500,000 in 2019 and $500,000 in 2020, using cost recovery method compute gross profit realized in 2018?

a.

$100,000.

b.

$300,000.

c.

$150,000.

d.

$200,000.

4. estimated cost of $4,000,000 the project will be completed within 4 years, the cost incurred to date for each period is, first year $1,000,000- second year $2,500,000- third year $3,200,000 and fourth year $4,100,000 while the estimasted cost to, complete the project for each each period is, first year $3,000,000- second year $1,700,000- third year $1,000,000 and fourth year is $0, based on above question and using percentage of completion method, what is the required journal entry in first year?

a.

Debit Construction Expense $3,0000,000, debit construction in process $1,000,000, credit construction revenue $5,000,000.

b.

Debit Construction Expense $1,0000,000, debit Unralized GP $250,000, credit construction revenue $1,250,000.

c.

Debit Construction Expense $1,0000,000, debit construction in process $250,000, credit construction revenue $1,250,000.

d.

Debit Construction Expense $3,0000,000, debit construction in process $900,000, credit construction revenue $5,000,000.

5. installment sales for 2018 is $600,000 and cost of goods sold $300,000 while the installment sales in 2019 is $1,000,000 and cost of goods sold $800,000,cash collection from 2018 sales was $400,000 in 2018 and $200,000 in 2019,cash collection from 2019 sales was $500,000 in 2019 and $500,000 in 2020, using cost recovery method compute unrealized gross profit in 2019?

a.

$150,000.

b.

$200,000.

c.

$300,000.

d.

$100,

Answer 1

1)(a) year 2018 - 50%, yearv2019- 20% (calculation in image)

2)(d) 0

because the amount of cost recovered in the first year is 1,000,000 and second year is 2,500,000 which is cumilatively 3,500,000 and since the total cost is not yet recovered therefore no profit shall be recognised.

The cost recovery method of revenue recognition is a concept in accounting that refers to a method in which a business does not recognize income related to a sale until the cash collected exceeds the cost of the good or service sold. In other words, using this method, revenue is only recognized when cash payments have recovered the seller’s cost.

3 (d) 200000 (calculation in image)

4(c) Debit Construction Expense $1,0000,000, debit construction in process $250,000, credit construction revenue $1,250,000.

5(b) 200000 (calculation in image)