1. Which of the following statement about the real estate development is FALSE ?

1. Real estate development includes five stages: land acquisition, construction, completion and occupancy, management and sales.
2. The real estate development project subjects to the financial risk, scheduling risk and design risk in the construction stage.
3. The most risky stage in the real estate development process is the sales stage.
4. The most risky stage in the real estate development process is the land acquisition stage.

2. Which of the following statement about the risk management in the construction of a real estate development project is TRUE?

1. For a real estate development project with a concentration of high risk components, the developer should choose a contractor with the lowest bid price.
2. For a real estate development project with a concentration of high risk components, the developer should choose a contractor using lump-sum contract.
3. For a real estate development project with a concentration of low risk components, the developer should choose a contractor with the lowest bid price.
4. For a real estate development project with a concentration of low risk components, the developer should choose a contractor using time-material contract.

3. If a real estate developer overrun the construction budget in the construction of a real estate project, in other words, the actual cost of construction exceeds the estimated cost of construction. Which of the following solution is not feasible?

1. The real estate developer can resort a loan from a gap lender.
2. The real estate developer can search for an equity partner.
3. The real estate developer can invest more equity.
4. The bank issuing the construction loan has the obligation to provide the gap loan.

1. The Statement of Cash Flows does not report the effects of

: Select one: a. Cash dividends paid. b. Common shares issued for cash to pay for assets or to pay debt. c. Common shares purchased for cancellation. d. Common shares issued as the result of a stock dividend

2.

Which of the following loss contingencies ordinarily will NOT be accrued as liabilities?

Select one:

a. Guarantees of indebtedness of others.

b. Pending lawsuits whose outcome is uncertain.

c. None of these will be accrued

d. Disputes over additional income taxes for prior years.

3. The January 1, 2006 status of long-term construction project No. 6 is as follows. Assume the completed contract method.
Costs incurred to date $20,000
Contract price $80,000
Estimated remaining cost to complete is $40,000
On December 31, 2006, the estimated remaining cost to complete was still $40,000, and $25,000 of cost had been incurred during 2006. What is the January 1, 2007 balance of Construction-in-Process?

Select one:

a. $45,000

b. $50,000

c. $30,000

d. $40,000

4. Which of the following is the most conservative (slowest to recognize) revenue recognition method?

Select one:

a. Instalment method of revenue recognition

b. Production method

c. Cost recovery method

d. Percentage of completion method

5.

Which of the following would be non-adjusting subsequent event(s)?

Select one:

a. Bankruptcy filing by the company's major customer, which accounted for 60% of the company's receivables at the balance sheet date.

b. An insured fire loss shortly after the company's year-end.

c. The company announces restructuring plans shortly before its year-end.

d. A sale of goods to a Company with good current ratio

Which of the following types of industry-specific inventory would an auditor ordinarily not require the assistance of a specialist?

Select one:

a. Raw materials such as sapphires used in the manufacturing processes of precious jewelry.

b. Raw materials such as meat that are weighed on a scale before being processed.

c. Raw materials such as lumber that are ordinarily stored outdoor.  

d. Raw materials such as steel pylons in calculating the percentage of completion of a complex construction project.

Boxer Corporation has consistently used the percentage-of-completion method of recognizing income. In 2018, Boxer started work on a $45,000,000 construction contract that was completed in 2019. The following information was taken from Boxer's accounting records in 2018.

Progress billings $15,400,000

Costs incurred 14,700,000

Collections 9,600,000

Estimated costs to complete 21,400,000

What amount of gross profit should Boxer have recognized in 2018 on this project?

When a significant percentage of project costs are related to procurement, project closeout reviews will necessarily spend some time on procurement issues.

Select two out of the following four industries: service (public and private); manufacturing; software and IT; and construction/building/maintenance. Compare the two industries with respect to how you would conduct project closeout reviews to assess the legal and financial success of your procurement management processes.

The City of West Hutchison is constructing a new road, which it estimates will cost $7.2 million. The city will finance the road with an expenditure-driven state construction grant of $1.2 million and a bond issuance of $6 million. Prepare journal entries to record the following transactions and events for the city’s Capital Projects Fund during calendar year 2019. No budgetary entries other than encumbrances should be recorded.1. The city receives $6.2 million from the bond issuance. The face amount of the bonds is $6 million.2. The city signs a contract with the lowest bidder, Mary Michel Construction, to build the road at a cost of $7.2 million. 3. The construction is complete and the city receives a bill from Mary Michel Construction for $7.1 million. A provision of the contract is that the city holds 15 percent retainage until the project is inspected and approved. 4. The city pays the amount owed to the contractor less the retainage.5. The city meets the spending provisions of the expenditure-driven construction grant and receives payment from the state.6. The city inspector approves the construction project and the contractor is paid the retainage.7. The city transfers the remaining cash balance to the Debt Service Fund

On June 15, 2018, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $410 million. The expected completion date is April 1, 2020, just in time for the 2020 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):

Required:
1. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion.
2. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming this project does not qualify for revenue recognition over time.
3. Suppose the estimated costs to complete at the end of 2019 are $200 million instead of $50 million. Compute the amount of revenue and gross profit or loss to be recognized in 2019 using the percentage of completion method.

On June 15, 2021, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $220 million. The expected completion date is April 1, 2023, just in time for the 2023 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):

Required:
1. Compute the revenue and gross profit will Sanderson report in its 2021, 2022, and 2023 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion.
2. Compute the revenue and gross profit will Sanderson report in its 2021, 2022, and 2023 income statements related to this contract assuming this project does not qualify for revenue recognition over time.
3. Suppose the estimated costs to complete at the end of 2022 are $80 million instead of $60 million. Compute the amount of revenue and gross profit or loss to be recognized in 2022 assuming Sanderson recognizes revenue over time according to percentage of completion.

On June 15, 2018, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $310 million. The expected completion date is April 1, 2020, just in time for the 2020 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions):

Required:
1. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion.
2. Compute the revenue and gross profit will Sanderson report in its 2018, 2019, and 2020 income statements related to this contract assuming this project does not qualify for revenue recognition over time.
3. Suppose the estimated costs to complete at the end of 2019 are $120 million instead of $30 million. Compute the amount of revenue and gross profit or loss to be recognized in 2019 using the percentage of completion method.

On June 15, 2021, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $340 million. The expected completion date is April 1, 2023, just in time for the 2023 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions): 2021 2022 2023 Costs incurred during the year $ 40 $ 120 $ 50 Estimated costs to complete as of December 31 160 90 — Required: 1. Compute the revenue and gross profit will Sanderson report in its 2021, 2022, and 2023 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion. 2. Compute the revenue and gross profit will Sanderson report in its 2021, 2022, and 2023 income statements related to this contract assuming this project does not qualify for revenue recognition over time. 3. Suppose the estimated costs to complete at the end of 2022 are $160 million instead of $90 million. Compute the amount of revenue and gross profit or loss to be recognized in 2022 assuming Sanderson recognizes revenue over time according to percentage of completion.