Question

FINANCIAL ACCOUNTING ( 5 multiple choice questions)

Chapter Revenue and Accounts Receivable :

1)On December 31, 20x5, you enter into a three year contract to build an office building for $19697757. At the end of 20x6, you incurred $6834251 of costs and expect to incur an additional $7626879 to complete the contract. How much revenue will you realize on this contract in 20x6?
Select one:
a. $2474801
b. $5236627
c. $17650656
d. $9309052

2)On December 31, 20x5, you enter into a three year contract to build an office building for $22055068. At the end of 20x6, you incurred $4231476 of costs and expect to incur an additional $8772453 to complete the contract. How much profit will you realize on this contract in 20x6?
Select one:
a. $2945239
b. $9051139
c. $6105900
d. $3017046

3)On January 1, 20x8, Myer Company’s allowance for doubtful accounts had a credit balance of $4319. Sales revenue for 20x8 was $985182 of which 80% was on credit. Historical data indicates that 3 percent of credit sales prove uncollectible. The company wrote off $7071 of accounts receivable during the year. What should the balance in the allowance account be after the adjusting entry for doubtful accounts is made?
Select one:
a. $16573 cr.
b. $12254 cr.
c. $20892 cr.
d. $12254 dr.

4) The following accounts were taken from Lane Co.’s unadjusted trial balance at December 31, 20x6:

Debit
Credit
Accounts Receivable
$339154

Allowance for doubtful accounts
2588

Net credit sales

$183769

Jessica estimates that 4.5% of the credit sales will become uncollectible. After adjustment at December 31, 20x6, what is the balance in the allowance for doubtful accounts?
Select one:
a. $10858
b. $5682
c. $15262
d. $8270

5)The following list of partial account balances is provided:

Sales returns and allowances
$461

Sales discounts
992

Sales revenue
61621

Allowance for doubtful accounts
934


What will be the net sales shown on the income statement?
Select one:
a. $59234
b. $60168
c. $61160
d. $60629

Answer 1

1)	31/12/20x6	Amount	%
	Cost incured in 20x6	$    6,834,251.00	47.26%
	additional cost to be incurred	$    7,626,879.00	52.74%
	total expected cost of contract	$ 14,461,130.00	100.00%
	Total revenue of contract	$ 19,697,757.00
	Revenue to be recognised in 20x6	$   9,309,052.30	(19697757*47.26%)
	as per percentage basis only revenue proportionate to the % of Total estimated cost incurred in current year.
	Answer is d.
2)	Cost incured in 20x6	$    4,231,476.00	33%
	additional cost to be incurred	$    8,772,453.00	67%
	total expected cost of contract	$ 13,003,929.00
	Total revenue of contract	$ 22,055,068.00
	Revenue to be recognised in 20x6	$    7,176,714.89	7351689
	Profit realized is	$   2,945,238.89
	as per percentage basis only revenue proportionate to the % of Total estimated cost incurred in current year.
	Answer is a.
3)	On January 1, 20x8
	Sales revenue	985182
	Credit sales- 80%	788145.6
	uncollectable debts - 3%	23644.37
	Allowance for doubtfull accounts
	Opening	4319
	Uncollectable debts	23644.37
	wrote off accounts receivables	-7071
	Balance in the allowance account	20892.37
	answer is C. $20892 cr.
4	Lane Co.'s unadjusted trail balance at December 31,20x6
	Accounts receiable	339154
	Allowance for doubtful accounts	2588
	Net credit sales	183769
	Estimated uncollectible credit sales	4.50%
	Estimated doubtfull	8269.61	(183769* 4.5%)
	Balance in allowance for doubtfull accounts	10858
	Answer is a.
5
	Sales revenue	61621
	Sales returns and allowances	461
	Sales discounts	992
		60168
	the allowance for doubtful accounts is not taken in net sales but shown as expenses
	Answer is b.