Question 1

Which of the following is not a separate performance obligation?

Accepted Answer

A)  A good that the seller could sell separately.
B)  A right of return.
C)  An option for a customer to purchase goods under terms that are more advantageous than those enjoyed by other customers.
D)  An extended warranty.E) A) and B)
F) None of the above

Question 2

Its inventory turnover ratio for 2013. Round your answer to one decimal place.

Accepted Answer

Its inventory turnov...

Question 3

Use of the installment sales method indicates little uncertainty about collection of the receivable.

Accepted Answer

A) True 
 B)False

Question 4

In its December 31, 2012, balance sheet, ADH would report:

Accepted Answer

A)  The asset, cost and profits in excess of billings, of $500,000.
B)  The liability, billings in excess of cost, of $300,000.
C)  The asset, contract amount in excess of billings, of $1,500,000.
D)  The asset, deferred profit, of $400,000.E) B) and C)
F) A) and D)

Question 5

Use of the percentage-of-completion method is dependent on a firm's ability to make dependable forecasts of future costs.

Accepted Answer

A) True 
 B)False

Question 6

In the DuPont formula, return on assets equals:

Accepted Answer

A)  Gross margin on sales x Inventory turnover.
B)  Profit margin on sales x Inventory turnover.
C)  Gross margin on sales x Asset turnover.
D)  Profit margin on sales x Asset turnover.E) A) and B)
F) All of the above

Question 7

What is the amount of gross profit on the project recognized by CCC during 2013?

Accepted Answer

A)  $160 million.
B)  $72 million.
C)  $48 million.
D)  Cannot be determined from the given information.E) A) and B)
F) A) and C)

Question 8

"VSOE" is necessary to separately recognize revenue in multiple-element contracts for:

Accepted Answer

A)  All service contracts.
B)  All product contracts.
C)  All contracts that involve at least one non-software element.
D)  Software contracts.E) A) and D)
F) A) and C)

Question 9

Under the completed contract method, gross profit or loss is never recognized until the contract is completed.

Accepted Answer

A) True 
 B)False

Question 10

Dowling's average inventory balance for 2013 is (rounded) :

Accepted Answer

A)  11.
B)  12
C)  11.5.
D)  12.5.E) A) and B)
F) B) and C)

Question 11

Its asset turnover ratio for 2013. Round your answer to two decimal places.

Accepted Answer

Its asset turnover r...

Question 12

The following footnote appeared in a recent annual report to stockholders of Sprint Corporation: "Certain wireless activation fees associated with unbundled sales continue to be deferred and amortized over the average life of the subscriber. Certain local installation fees are deferred and amortized over the average life of the customer."
Briefly explain why Sprint recognizes this type of revenue as it does.

Accepted Answer

According to SEC revenue recognition gui...

Question 13

Waldman Associates received a written, approved contract to deliver economic consulting services, with service commencing in one month. The contract specifies the services that Waldman is to perform, and the payment terms. Waldman and the customer both can cancel the contract without penalty prior to commencing service. Does Waldman have a contract for purposes of revenue recognition on the day the contract is received?

Accepted Answer

A)  Yes, because Waldman has a written approved contract.
B)  No, because Waldman can cancel without penalty.
C)  Maybe, depending on whether Waldman can estimate collectability of the receivable.
D)  Insufficient data on which to base an answer.E) A) and D)
F) All of the above

Question 14

Briefly explain the criteria for recognition of initial franchise fees by the franchisor.

Accepted Answer

Initial franchise fee recognition rules,...

Question 15

Under GAAP, with respect to multiple-element arrangements, if the revenue for a particular part of a multiple-part arrangement does not qualify for separate recognition, it is:

Accepted Answer

A)  Never recognized.
B)  Recognized when the contract is signed or persuasive evidence of an arrangement exists.
C)  Recognized when revenue for the other parts is recognized.
D)  None of the other answers is correctE) B) and C)
F) A) and B)

Question 16

Assuming BCC used the cost recovery method to recognize revenue under IFRS, what would gross profit have been in 2012 and 2013 (rounded to the nearest thousand) ?

Accepted Answer

A)  Choice A
B)  Choice B
C)  Choice C
D)  Choice DE) B) and D)
F) B) and C)

Question 17

What are CCC's estimated remaining construction costs on the project at the end of 2013?

Accepted Answer

A)  $90 million.
B)  $135 million.
C)  $225 million.
D)  None of the other answers is correct.E) None of the above
F) A) and D)

Question 18

For long-term contracts, the cost recovery method under IFRS requires recognizing equal amounts of revenue and cost until all costs are recovered.

Accepted Answer

A) True 
 B)False

Question 19

When using the cost recovery method of accounting for long-term contracts under IFRS, early in the life of the contract it is typically the case that:

Accepted Answer

A)  Expenses in excess of revenues are recognized.
B)  Revenues in excess of expenses are recognized.
C)  An equal amount of revenue and expense is recognized.
D)  There is no predictable pattern of revenue and expense.E) All of the above
F) B) and C)

Question 20

The following information is provided in the 2013 annual report to shareholders of The BizStore:  Required: Compute U-Z in the table above.

Accepted Answer

• U: Profit margin = NI/sales, so NI = (...

Exam 5: Income Measurement and Profitability Analysis

Correct Answer
verified
According to SEC revenue recognition gui...
View Answer

What is the amount of gross profit on the project recognized by CCC during 2013?

Correct Answer
verified

Assuming BCC used the cost recovery method to recognize revenue under IFRS, what would gross profit have been in 2012 and 2013 (rounded to the nearest thousand) ?

Correct Answer
verified

Under the completed contract method, gross profit or loss is never recognized until the contract is completed.

Correct Answer
verified

Use of the percentage-of-completion method is dependent on a firm's ability to make dependable forecasts of future costs.

Correct Answer
verified

Which of the following is not a separate performance obligation?

Correct Answer
verified

Dowling's average inventory balance for 2013 is (rounded) :

Correct Answer
verified

The following information is provided in the 2013 annual report to shareholders of The BizStore: Required: Compute U-Z in the table above.

Correct Answer
verified
• U: Profit margin = NI/sales, so NI = (...
View Answer

In the DuPont formula, return on assets equals:

Correct Answer
verified

In its December 31, 2012, balance sheet, ADH would report:

Correct Answer
verified

Its asset turnover ratio for 2013. Round your answer to two decimal places.

Correct Answer
verified
Its asset turnover r...
View Answer

Briefly explain the criteria for recognition of initial franchise fees by the franchisor.

Correct Answer
verified
Initial franchise fee recognition rules,...
View Answer

Use of the installment sales method indicates little uncertainty about collection of the receivable.

Correct Answer
verified

Correct Answer
verified

What are CCC's estimated remaining construction costs on the project at the end of 2013?

Correct Answer
verified

"VSOE" is necessary to separately recognize revenue in multiple-element contracts for:

Correct Answer
verified

When using the cost recovery method of accounting for long-term contracts under IFRS, early in the life of the contract it is typically the case that:

Correct Answer
verified

For long-term contracts, the cost recovery method under IFRS requires recognizing equal amounts of revenue and cost until all costs are recovered.

Correct Answer
verified

Its inventory turnover ratio for 2013. Round your answer to one decimal place.

Correct Answer
verified
Its inventory turnov...
View Answer

Under GAAP, with respect to multiple-element arrangements, if the revenue for a particular part of a multiple-part arrangement does not qualify for separate recognition, it is:

Correct Answer
verified

Exam 5: Income Measurement and Profitability Analysis

Correct AnswerverifiedAccording to SEC revenue recognition gui...View AnswerShow Answer

What is the amount of gross profit on the project recognized by CCC during 2013?

Correct AnswerverifiedShow Answer

Assuming BCC used the cost recovery method to recognize revenue under IFRS, what would gross profit have been in 2012 and 2013 (rounded to the nearest thousand) ?

Correct AnswerverifiedShow Answer

Under the completed contract method, gross profit or loss is never recognized until the contract is completed.

Correct AnswerverifiedShow Answer

Use of the percentage-of-completion method is dependent on a firm's ability to make dependable forecasts of future costs.

Correct AnswerverifiedShow Answer

Which of the following is not a separate performance obligation?

Correct AnswerverifiedShow Answer

Dowling's average inventory balance for 2013 is (rounded) :

Correct AnswerverifiedShow Answer

The following information is provided in the 2013 annual report to shareholders of The BizStore: Required: Compute U-Z in the table above.

Correct Answerverified• U: Profit margin = NI/sales, so NI = (...View AnswerShow Answer

In the DuPont formula, return on assets equals:

Correct AnswerverifiedShow Answer

In its December 31, 2012, balance sheet, ADH would report:

Correct AnswerverifiedShow Answer

Its asset turnover ratio for 2013. Round your answer to two decimal places.

Correct AnswerverifiedIts asset turnover r...View AnswerShow Answer

Briefly explain the criteria for recognition of initial franchise fees by the franchisor.

Correct AnswerverifiedInitial franchise fee recognition rules,...View AnswerShow Answer

Use of the installment sales method indicates little uncertainty about collection of the receivable.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What are CCC's estimated remaining construction costs on the project at the end of 2013?

Correct AnswerverifiedShow Answer

"VSOE" is necessary to separately recognize revenue in multiple-element contracts for:

Correct AnswerverifiedShow Answer

When using the cost recovery method of accounting for long-term contracts under IFRS, early in the life of the contract it is typically the case that:

Correct AnswerverifiedShow Answer

For long-term contracts, the cost recovery method under IFRS requires recognizing equal amounts of revenue and cost until all costs are recovered.

Correct AnswerverifiedShow Answer

Its inventory turnover ratio for 2013. Round your answer to one decimal place.

Correct AnswerverifiedIts inventory turnov...View AnswerShow Answer

Under GAAP, with respect to multiple-element arrangements, if the revenue for a particular part of a multiple-part arrangement does not qualify for separate recognition, it is:

Correct AnswerverifiedShow Answer

Correct Answer
verified
According to SEC revenue recognition gui...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
• U: Profit margin = NI/sales, so NI = (...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Its asset turnover r...
View Answer

Correct Answer
verified
Initial franchise fee recognition rules,...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Its inventory turnov...
View Answer

Correct Answer
verified