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AC 302 Intermediate Accounting III Unit 2 Exam Answers

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AC 302 Unit 2 Exam (Kaplan)

Cooper Construction Company had a contract starting April 2015, to construct a $18,000,000 building that is expected to be completed in September 2017, at an estimated cost of $16,500,000. At the end of 2015, the costs to date were $7,590,000 and the estimated total costs to complete had not changed. The progress billings during 2015 were $3,600,000 and the cash collected during 2015 was 2,400,000.

At December 31, 2015 Cooper would report Construction in Process in the amount of: 

The last step in the process for revenue recognition is to 

Signing of the contract by the two parties is 

The third step in the process for revenue recognition is to 

The first step in the process for revenue recognition is to 

Gomez, Inc. began work in 2014 on contract #3814, which provided for a contract price

of $14,400,000. Other details follow:

Costs incurred during the year

Estimated costs to complete, as of December 31

Billings during the year

Collections during the year

Assume that Gomez uses the completed-contract method of accounting. The portion of

the total gross profit to be recognized as income in 2015 is 

When a customer purchases a product but is not yet ready for delivery, this is referred to as 

Cooper Construction Company had a contract starting April 2015, to construct a $18,000,000 building that is expected to be completed in September 2017, at an estimated cost of $16,500,000. At the end of 2015, the costs to date were $7,590,000 and the estimated total costs to complete had not changed. The progress billings during 2015 were $3,600,000 and the cash collected during 2015 was 2,400,000.

For the year ended December 31, 2015, Cooper would recognize gross profit on the building of: 

The cost-to-cost basis measures progress towards completion by 

On August 5, 2014, Famous Furniture shipped 20 dining sets on consignment to Furniture Outlet, Inc. The cost of each dining set was $350 each. The cost of shipping the dining sets amounted to $1,800 and was paid for by Famous Furniture. On December 30, 2014, the consignee reported the sale of 15 dining sets at $850 each. The consignee remitted payment for the amount due after deducting a 6% commission, advertising expense of $300, and installation and setup costs of $390. The amount cash received by Famous furniture is 

The transaction price 

The role of the agent in a Principal-Agent relationship is to 

The use of the net method of recognizing revenue by an agent 

Monroe Construction Company uses the percentage-of-completion method of accounting. In 2015, Monroe began work on a contract it had received which provided

for a contract price of $25,000,000. Other details follow:

Costs incurred during the year
Estimated costs to complete as of December 31 Billings during the year
Collections during the year

What should be the gross profit recognized in 2015? 

A company has satisfied its performance obligation when the 

Consideration paid or payable to customers 

On January 15, 2014, Bella Vista Company enters into a contract to build custom equipment for ABC Carpet Company. The contract specified a delivery date of March 1. The equipment was not delivered until March 31. The contract required full payment of $75,000 30 days after delivery. This contract should be 

Seadrill Engineering licensed software to oil-drilling firms for 5 years. In addition to providing the software, the company also provides consulting services and support to ensure smooth operation of the software. The total transaction price is $350,000. Based on standalone values, the company estimates the consulting services and support have a value of $100,000 and the software license has a value of $250,000. Assuming the performance obligations are not interdependent, the journal entry to record the transaction includes 

Horner Construction Co. uses the percentage-of-completion method. In 2014, Horner began work on a contract for $16,500,000; it was completed in 2015. The following cost

data pertain to this contract:

Year Ended December 31

2014
Cost incurred during the year $5,850,000 Estimated costs to complete at the end of year 3,900,000

2015 $4,200,000


The amount of gross profit to be recognized on the income statement for the year ended

December 31, 2015 is 

During 2014, Gates Corp. started a construction job with a total contract price of $14,000,000. The job was completed on December 15, 2015. Additional data are as

follows:

Actual costs incurred during the year Estimated remaining costs
Billed to customer
Received from customer

2014 $5,400,000

5,400,000 4,800,000

2015 $6,100,000

— 9,200,000

4,000,000
Under the completed-contract method, what amount should Gates recognize as gross

profit for 2015? 

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. Container Corporation purchased computer equipment, installation and training for a total cost of $120,000 on March 15, 2014. Estimated standalone fair values of the equipment, installation and training are $75,000, $50,000 and $25,000 respectively. The journal entry to record the transaction on March 15, 2014 will include a 

In 2015, Fargo Corporation began construction work under a three-year contract. The contract price is $4,800,000. Fargo uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of costs incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2015, follow:

Balance Sheet

Accounts receivable—construction contract billings Construction in progress
Less contract billings
Costs and recognized profit in excess of billings Income Statement

Income (before tax) on the contract recognized in 2015 How much cash was collected in 2015 on this contract? 

The second step in the process for revenue recognition is to 

Transaction price for multiple performance obligations should be allocated 

Bella Pool Company sells prefabricated pools that cost $100,000 to customers for $180,000. The sales price includes an installation fee, which is valued at $25,000. The fair value of the pool is $160,000. The installation is considered a separate performance obligation and is expected to take 3 months to complete. The transaction price allocated to the pool and the installation is 

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