Interactive Developmental Mathematics 1St Edition Rockswold Test Bank Full Chapter PDF

Interactive Developmental Mathematics
1st Edition Rockswold Test Bank

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TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
1) Receipt of cash by the seller at the time of sale is not required for the recognition of revenue.
Answer: True False
2) In accounting, the term "revenue recognition" refers to measuring the expense related to the revenue
for a specific period.
Answer: True False
3) Generally, expenses incurred to generate revenues should be matched to the revenues recognized in
a given period.
Answer: True False
4) The percentage-of-completion method of accounting for long-term construction projects is

supported on the basis that it is more conservative than the completed contract method.
Answer: True False
5) Non-refundable deposits automatically meet the criteria for immediate revenue recognition.
Answer: True False
6) ASPE and IFRS will both follow a contract-based approach to revenue recognition in the future.
Answer: True False
7) The sale of a company's land would necessarily result in a gain or loss, and not a revenue or
expense.
Answer: True False
8) The earnings based and contract based approaches will both result in the same amount of revenue
being recognized over time.
Answer: True False
9) Revenues for certain commodities with a readily available market may be recognized at production
since uncertainties with respect to the sale are likely to be minimal.
Answer: True False
10) Collectability must be certain in order for revenue to be recognized.

Answer: True False
11) It may be argued that the earnings based approaches is more focused on the income statement while
the contract based approach focuses on the balance sheet.
Answer: True False
12) The percentage- of -completion method of accounting for long-term construction-type contracts is
preferable when estimates of costs to complete and extent of progress toward completion are
reasonably dependable.
Answer: True False
1
13) Revenues from peripheral transactions are considered gains, while those from a company's principal
line of business would be considered sales or revenues.
Answer: True False
14) When rent is received in advance the event that triggers revenue recognition is the passage of time.
Answer: True False
15) An initial licensing fee that allows the holder to use the name of another company for a defined
period of time would be capitalized and subsequently amortized over the number of periods
benefitted.
Answer: True False
16) A furniture manufacturer receives a purchase order from a client for a customized wooden cabinet.
The cabinet will be delivered and paid for upon completion which is estimated to be in three months
from now. This event would trigger a journal entry on the manufacturer's books if the earnings
approach were used, but not if the contract approach were used.
Answer: True False
17) Warranty costs related to goods sold on instalment sales should not be accrued.
Answer: True False
18) The use ofthe contract based approach to revenue recognition is dependent on whether or not the
transaction with the client has commercial substance.
Answer: True False
19) Revenue should not be recognized if the buyer's obligation to pay the seller is contingent on the
resale of the product.
Answer: True False
20) The contract price must be known with certainty in order for the contract based approach to be
applied.
Answer: True False
21) There will be no impact on a company's net assets until revenue is recognized.
Answer: True False
22) In
a consignment arrangement, the seller is essentially acting as an agent of the manufacturer of the
goods or their owner.
Answer: True False
23) The gross approach to recording revenues results in higher earnings than does the net method.
Answer: True False
24) Under a bill and hold arrangement, revenue recognition is delayed until the buyer takes possession
of the merchandise.
Answer: True False
2
25) "Billings on contracts" is a contra account to "Accounts Receivable."
Answer: True False
26) Ifa company receives a commission on products it sells but otherwise has no control over selling
prices, it is essentially acting as an agent on behalf of another company, and would likely record
revenue from these sales on a net basis.
Answer: True False
27) When goods are sold, the event which triggers revenue recognition is the delivery of the goods.
Answer: True False
28) Non-refundable payments can normally be recognized upon receipt, since there is no performance
obligation related to these payments.
Answer: True False
29) The percentage-of-completionand completed contract methods will produce different periodic
income amounts, but the Accounts Receivable balances will be equal.
Answer: True False
30) The value of the consideration received must be known or measurable with absolute certainty in
order for revenue to be recognized.
Answer: True False
31) When goods are sold, revenue may still be recognized if there is an insignificant degree of
continuing managerial involvement in some instances.
Answer: True False
32) The transaction price when non-monetary assets are involved in a sale is the value of the non-cash
consideration received.
Answer: True False
33) The percentage-of-completion method for long-term construction contracts can be used if at least
the ultimate collection of the contract price is reasonably certain.
Answer: True False
34) Using actual and estimated cost figures to estimate the degree of completion of a long-term
construction project is an example of an input-based approach to estimation.
Answer: True False
35) ABC Inc. uses the percentage of completion method to account for one of its long-term construction
projects. ABC reported a loss on this contract for its most recent fiscal year, but the contract is
expected to be profitable. This is an onerous contract.
Answer: True False
3
36) ABC Inc. uses the percentage of completion method to account for one of its long-term construction
projects. Last year the company recorded revenue of $1 million during the first year of one of its
projects, which at the time was expected to be profitable. Nearly one year later, the company has
incurred substantial cost-overruns. The company now expects the contract to lose $500,000. This is
an onerous contract. ABC should therefore record a loss of $500,000 on this contract for the current
year.
Answer: True False
37) The amount of revenue recognized by a franchisor will usually depend on the franchise agreement.
Answer: True False
38) When one company is acting as an agent on behalf of another company or individual, it will
normally report revenues on a net basis.
Answer: True False
39) Economic Value Added (EVA) is the difference between a product's input cost and final sales price.
This figure is dependent up on the firm's earnings process.
Answer: True False
40) A purchase order received from a client would trigger a journal entry under the earnings-based
revenue recognition approach, but not on the contract-based approach.
Answer: True False
41) As a general rule, the greater the uncertainty involved with respect to a sales transaction, the longer
one would delay revenue recognition.
Answer: True False
42) Under IFRS, sales contracts with multiple deliverables may be treated as though they were a single
element, for the sake of simplicity.
Answer: True False
43) Under IFRS, sales contracts with multiple deliverables should be split according to their relative fair
values if possible, and accounted for accordingly.
Answer: True False
44) Under IFRS, goods sold under Bill and Hold provisions must be on hand and ready for immediate
delivery if revenue is to be recognized.
Answer: True False
45) Biological assets are generally recognized at their net realizable values, with gains and losses
flowing through income.
Answer: True False
46) Ifa client presents an extreme credit risk, the seller would be more likely to use the Installment
Sales method to account for the transaction than the Cost Recovery Method.
Answer: True False
4
47) In the critical event that the revenue is not recognized at the time of the sale due to a return
privilege, the gross margin is to be recognized only after the return privilege has expired.
Answer: True False
48) The use of actual and expected costs to determine the percentage of completion on a long term
project is an example of an output method approach to evaluating contract progress.
Answer: True False
49) Under IFRS, interest revenue must be recognized using the effective interest method, and dividend
revenue must be recognized when the right to receive them has been established, and there are no
significant uncertainties.
Answer: True False
50) When a barter transaction has no commercial substance, a gain or loss must always be recognized
on the income statement as a result of the exchange.
Answer: True False
51) When goods are sold f.o.b. shipping point, the revenue earnings process is usually not considered to
be complete until the buyer has received the goods and inspected them.
Answer: True False
52) The earliest point at which all criteria for revenue recognition are met is known as a critical event.
Answer: True False
53) When a grocery store sells groceries and receives payment in the form of a cheque, the revenue
principle would state that the revenue should not be recognized until the cheque clears the bank.
Answer: True False
54) When a one year-lease-term is signed, the lessor earns revenue with the passage of time.
Answer: True False
55) Revenues must always be recognized at a single point in time.

Answer: True False
56) Ifsales are made on "FOB destination" terms, the revenue earning process is completed when the
products are removed from the seller's place of business by the common carrier.
Answer: True False
57) If fair values cannot be determined during a barter transaction, the book value method must be used.
Answer: True False
58) Under the percentage-of-completion method of accounting for long-term construction contracts,
revenue is recognized only when the construction is completed.
Answer: True False
5
59) Under the percentage-of-completion method of accounting for long-term construction contracts,
revenue is recognized as construction progresses (usually on the basis of costs incurred) to attain a
matching of revenues and expenses.
Answer: True False
60) Under the completed contract method, all construction costs are accumulated in an inventory
account.
Answer: True False
61) Bearer plants are recorded at their fair value less costs to sell.
Answer: True False
62) Once biological assets become ready for sale, they effectively become inventory. Deemed cost in
this case is fair value of the items less their selling costs. Subsequently they are valued at their fair
value less costs to sell with gains and losses flowing to income.
Answer: True False
63) When cash is collected on account and the instalment sales method is used, the debit is to instalment
accounts receivable and the credit is to cash.
Answer: True False
64) The completed-contract method of revenue recognition recognizes revenue on a long-term project as
work progresses so that timely information is provided.
Answer: True False
65) Payment on account of progress billings, when using the percentage of completion method of
recognizing revenue are debited to cash and credited to progress billings.
Answer: True False
66) A long-term contract is automatically considered onerous if a loss is recognized in any given year.
Answer: True False
67) Ifit becomes apparent that a long term project will result in a loss, the full amount of the loss must
be accounted for in the year it is first estimable.
Answer: True False
68) Most construction companies cannot afford to wait until the completion of the contract to collect
their billings.
Answer: True False
69) When using completed contract method of recognizing revenue, the billings to the customer are
debited to cash and credited to progress billings.
Answer: True False
70) Non-monetary transactions by definition involve no exchange of cash.

Answer: True False
6
71) Non-monetary transactions lacking commercial substance can never result in a gain or loss being
recorded.
Answer: True False
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
72) ABC Inc. sold a DVD player to a client on June 30th, Year 2 for $150. The DVD player, which came
with a 2-year warranty, was thought to be worth $100 if sold without the warranty.
As a result of this sale, how much sales/revenue would ABC Inc. take into income on its December
31st, Year 2 income statement?
A) $125.00 B) $100.00 C) $112.50 D) $150.00
Answer: C
73) Which of the following would not be considered a multiple-deliverable arrangement?

A) A product sold with a manufacturer's warranty which covers only product assurances, where
only the product has a separately identifiable revenue stream.
B) A product sold with a manufacturer's warranty, where both the product and warranty have
separately identifiable revenue streams.
C) Customer Loyalty Programs.
D) Franchise Fees
Answer: A
74) In a normal sale, generally the most uncertain factor in the revenue recognition process is:
A) The realizability of the resource or item received by the seller
B) The relevance of the resource or item received by the seller
C) The seller's fulfillment of its responsibility in the transaction
D) The measurability of the resource or item received by the seller
Answer: A
75) Which of the following is not required for the recognition of revenue?
A) Seller must receive an item ultimately realizable in cash, noncash resources, or claims to cash.
B) The transaction must create a measurable financial statement element which fulfills the
definition of a revenue.
C) The earnings process must be essentially complete.
D) Receipt of cash by the seller at the time of sale.
Answer: D
76) In accounting, the term "revenue recognition" refers to:

A) Identifying sources of revenue.
B) Identifying transactions that should be recorded as revenue in the current reporting period.
C) Identifying transactions that result in an inflow of cash from customers.
D) Measuring the expense related to the revenue for a specific period.
E) Identifying the period when the customer first indicates the need for a good or service.
Answer: B
7
77) The revenue principle states that revenue should be recognized only when a(n):
A) Exchange transaction involving goods or services has occurred and the earnings process is
essentially completed.
B) Exchange transaction involving goods and services has occurred and a cash down payment has
been received.
C) Completed earnings process can be projected.
D) Sale or service transaction has occurred.
Answer: A
78) Inselecting an accounting method for a newly contracted long-term construction project, the
principle factor to be considered should be:
A) The method usually used by the contractor to account for other long-term construction
contracts.
B) How reliable would an estimate be of the progress toward contract completion?
C) The terms of payment in the contract.
D) The kind of technical facilities used in construction.
Answer: B
79) When work to be done and costs to be incurred on a long-term contract cannot be reliably estimated,
which of the following methods of revenue recognition is preferable?
A) Sales method B) Completed contract method
C) Instalment method D) Percentage-of-completion method
Answer: B
80) Whichof the following statements regarding the percentage-of-completion and completed contract
methods of accounting for long-term construction contracts are true?
A) They recognize different amounts of income for the construction period.
B) Under only the percentage of completion method is it possible to recognize a loss for the period
when an overall profit is expected on the contract.
C) Neither requires losses to be recognized in the period of occurrence.
D) They produce the same inventory carrying values during the construction period.
Answer: B
81) Which of the following is not a difference between the percentage-of- completion and completed
contract methods of accounting for long-term construction contracts?
A) They report different inventory amounts during the construction period.
B) One records income (loss) each period during the construction period and the other does not.
C) They cause different cash inflows during the construction period.
D) One requires estimates of completion during the construction period and the other does not.
Answer: C
8
82) The percentage-of-completion method of accounting for long-term construction projects is
supported on the basis that it:
A) Produces a realistic matching of expenses with revenues.
B) is more conservative than the completed contract method.
C) Understates cost of goods sold.
D) Better conforms to the cost principle.
Answer: A
83) Choose the correct statement concerning the percentage-of-completion method of accounting for a
firm with only one current long-term construction contract in process (assume no loss is projected):
A) It is possible to have both a net current asset account and a net current liability account in this
situation.
B) If the construction- in- process account exceeds the billings account, total costs to date must
exceed total billings to date.
C) If the construction- in- process account exceeds the billings account, total costs to date must
exceed total cash received on the contract to date.
D) The net current asset account (net of construction- in- process, and billings) exceeds that same
account under the completed contract method.
Answer: D
84) Which of the following is the most conservative (slowest to recognize) revenue recognition method?
A) Production method B) Percentage of completion method
C) Instalment method of revenue recognition D) Cost recovery method
Answer: D
85) During theperiod of construction, financial information related to a long-term contract, which is
being accounted for using, the completed contract method will:
A) Appear only on the balance sheet during the period of construction.
B) Not appear on the financial statements.
C) Appear on both the income statement and balance sheet during the construction period.
D) Appear only on the income statement during the period of construction.
Answer: A
86) Why is construction-in-progress increased by the annual recognized profit on long-term construction
contracts?
A) Because the cost of the project is reduced.
B) Because work has been done.
C) Because the contract price has increased.
D) Because the project's value is increased above cost.
Answer: D
9
87) Choose the correct description of the net balance of costs in excess of billings on long-term
contracts. Assume only one current contract, and that contract price does not equal total estimated
contract cost at the end of the current year.
A) Under percentage of completion, the balance equals cost to date less billings, if profit has been
recognized.
B) Under percentage of completion, the balance equals cost to date less billings, less total
projected loss.
C) Under completed contract, the balance equals total estimated profit less billings.
D) Under completed contract, the balance equals cost plus billings.
Answer: B
88) The principle disadvantage of using the percentage-of-completion method of recognizing revenue
from long-term construction contracts is that it:
A) is likely to assign a small amount of revenue to a period during which much revenue actually
was earned.
B) is unacceptable for tax purposes.
C) Gives results based upon estimates, which may be subject to considerable uncertainty.
D) May require that inter-period tax allocation procedures be used.
Answer: C
89) The percentage-of-completion and completed contract methods of accounting for long-term
construction contracts will produce:
A) The same amount of income in the year of completion.
B) Equal balances each period in the Billings On Contracts account.
C) The same cost of construction (expense) each year for a project.
D) The same inventory carrying value each year during the construction period.
Answer: B
90) P-Dog Inc. has a loyalty points program which awards two customer loyalty points for every $100 of
goods purchased. During the year, the company sold $200,000 of goods in the store and awarded
4,000 points which can be redeemed and used towards future purchases. The stand-alone selling
price for the goods sold is $150,000. Based on past experience, P-Dog expects that only 80% of the
points will actually be redeemed. The stand-alone selling price of the points is $1.50 per point.
Based on the information provided, the amount of revenue that P-Dog will report on its statement of
comprehensive income for the year would be:
A) $154,800. B) $193,798. C) $200,000. D) $150,000.
Answer: B
10
91) Under the completed contract method of income recognition on long-term construction contracts:
A) The accumulated amount in the "Construction-in-Progress" account is essentially the amount of
cost of goods sold at completion date.
B) Income is accumulated in the "Construction-in-Progress" account.
C) "Construction-in-Progress" is reduced when billings are collected.
D) The balance in the "Construction-in-Progress" account is reported on the balance sheet as a
long-term asset until the date of completion.
Answer: A
92) Under the percentage-of-completion method of income recognition on long-term construction

contracts:
A) Income is accumulated in the "Construction-in-Progress" inventory account.
B) The ending inventory is the same as it would be if accounted for under the completed contract
method.
C) No income amount is closed each period to income summary.
D) The percentage of completion in any year depends on the proportion of billings collected.
Answer: A
93) On April 30, Green Ltd. sold land with a book value of $600,000 to Brown Ltd. for its market value
of $800,000. Brown Ltd. gave Green Ltd. a 12 percent, $800,000 note secured only by the land. At
the date of sale, Brown Ltd. was in a very poor financial position and its continuation as a going
concern was very questionable. Green Ltd. should:
A) Record the note at its discounted value.
B) Fully reserve the note by creating an allowance contra account.
C) Record a $200,000 gain on the sale of land.
D) Use the cost recovery method of accounting.
Answer: D
94) Net instalment accounts receivable is $5,000. Assume the instalment method of revenue recognition
is used and a gross profit percentage of 20%. Therefore:
A) $6,250 at sales price has not been collected B) $5,000 at sales price has not been collected
C) $1,250 of gross profit has been recognized D) $6,250 of cost has not been collected
Answer: A
95) Revenue is recognized at the time of sale under the:

A) Sales method when goods are sold on credit.
B) Collection method.
C) Instalment method.
D) Cost recovery method.
E) Percentage-of-completion method.
Answer: A
11
96) Grocery storesrecognize most of their revenue based on the:
A) Proportional performance method.
B) Cost recovery method.
C) Instalment method.
D) Specific performance method.
E) Sales method.
Answer: E
97) Which of the following bases of revenue recognition reflects the greatest degree of uncertainty about
future critical events?
A) Sales method applied to sales of a department store
B) Production method on cost-plus-fixed-fee contract
C) Percentage-of-completion method on construction contract
D) Cost recovery method applied to a bond investment
Answer: D
98) Revenue isrecognized prior to the time of sale under the:

A) Completed contract method. B) Specific performance method.
C) Production method. D) Instalment sales method.
Answer: C
99) Whichof the following methods of revenue recognition is appropriate for use by a real estate broker
whose sole activity is sale of realty on a commission basis?
A) Proportional performance method B) Specific performance method
C) Completed performance method D) Collection method
Answer: B
12
100) A corporation incurred $111,000 costs to extract a diamond. The diamond turned out to be flawed,
so the company decided to break it into small pieces and sell diamond chips. The company was
uncertain if the diamond chips would sell at all. The diamond chips did sell, and the company had
the following sales and accounts receivable balances over the five following years:
Accounts Receivable
Balance Sales
January 1, 2001 $0 $15,000 for 2001
January 1, 2002 10,500 30,000 for 2002
January 1, 2003 25,500 60,000 for 2003
January 1, 2004 40,500 24,000 for 2004
January 1, 2005 78,000 15,000 for 2005
The accountant recommended that the company use the cost recovery method of income recognition.
Using this method, the company will recognize revenue as follows:
2013 2014
1 $60,000 $60,000
2 24,000 24,000
3 0 0
4 6,000 0
5 Not determinable based on the data given
A) Choice 1 B) Choice 2 C) Choice 3 D) Choice 4 E) Choice 5

Answer: C
101) A corporation sold goods for $10 million during 2007. Of this amount, $6 million were in cash, and
$4 million was on account. However, the company collected $2 million of the sales on account
during 2007. In conformity with the revenue principle, the amount of revenue that should be
recognized in 2007 is:
A) $8 million B) $6 million C) $4 million D) $2 million E) $10 million
Answer: E
102) A construction company has contracted with a major university to build a new sports complex. The
contract calls for two sports arenas to be built in the next three years. The company will receive
$24,000,000 for the project and their engineers originally estimated a total cost to construct the two
arenas of $20,400,000. The two arenas are scheduled for completion in May of 2007. If an actual
cost of $9,200,000 is expended in 2004, and the engineers estimate another $12,800,000 is to be
expended to complete construction, how much income is to be recognized under the
percentage-of-completion method in 2004?
A) $1,163,636 B) $836,364 C) $2,000,000 D) $3,600,000
Answer: B
13
103) A construction company uses the percentage-of-completion method of accounting. In 2007, the
company began work on a government contract which had a contract price of $4,000,000 and
estimated costs of $3,000,000. Additional data were as follows:
2007 2008
Costs incurred during the year $600,000 $2,550,000
Estimated costs to complete, as of 2,400,000
12/31/2007
Billing during the year 720,000 3,080,000
Collections during the year 500,000 3,100,000
The portion of the total contract income to be recognized during 2007 is:
A) $200,000 B) $250,000 C) $120,000 D) $1,000,000
Answer: A
104) A construction company uses the percentage-of-completion method for long-term construction
contracts. A particular job was begun in 2006 and completed 2008. During 2007, it appeared that the
project would cost 25 percent more than originally expected. Data at each year-end are given below:
2006 2007 2008

End of year estimated cost $200,000 $100,000 $-0-
remaining
Annual cost incurred 200,000 200,000 60,000
The contract price was $700,000. Assuming the company properly recorded income in 2006, how
much income should be recorded in 2007?
A) $10,000 B) $160,000 C) $192,000 D) $42,000
Answer: A
105) Under the percentage-of-completion method, a company has recognized $40,000 of profit through to
the beginning of the current year on a contract, and total estimated contract cost is $500,000 at that
time. The contract price is $800,000. What is the percent of completion at the beginning of the
current year?
A) 15.8% B) Insufficient data C) 8% D) 13.33%
Answer: D
14
106) Given the following data, what is profit in 2007 under the percentage-of-completion method for a
project begun in 2006 with a contract price of $1,000?
2006 2007
Costs incurred this year $100 $200
Total estimated costs remaining at 700 400
end of year
A) $104 B) $61 C) $129 D) $86

Answer: A
107) Given the following data, what is the balance in construction-in-process at the end of 2006 under the
percentage of completion method for a project begun in 2006 with a contract price of $1,100?
2006 2007
Total estimated costs remaining at end 700 400
of year
A) $400 B) $100 C) $138 D) $38

Answer: C
108) Under the percentage of completion method, $400 of profit has been recognized in prior years on a
project with a contract price of $5,000. Data available as follow:
Total cost incurred till date = $3,000

Estimated costs remaining at end of current year = $2,500
What profit or loss is recognized in the current year?

A) $400 loss B) $900 loss C) $500 loss D) no profit or loss
Answer: B
109) A firm uses the instalment method of revenue recognition on an item with a cash selling price of
$1,000 and cost of $600. During the year of sale, the firm received $250 from the customer.
Therefore, the net instalment account receivable equals which of the following amounts at the end
of the year of sale?
A) $300 B) $450 C) $750 D) $400
Answer: B
15
110) A firm uses the instalment method of revenue recognition on an item with a cash selling price of
$1,000 and cost of $600. During the year of sale, the firm received $250 from the customer.
Thereafter, no more cash is received. The firm repossesses the item, worth $500 at that time. The
entry to record the repossession includes:
A) Gain $50 B) Gain $200 C) Loss $350 D) Loss $250
Answer: A
111) A corporation, which began business on January 1, 2006, appropriately uses the instalment sales
method of reporting for accounting purposes. The following data were available for the years 2006
and 2007:
2006 2007
Instalment sales $1,050 $1,260
Cost of instalment sales 840 945
General and administrative expenses 105 126
Cash collected on 2006 instalment sales 450 375
Cash collected on 2007 instalment sales 600
The balance in the deferred gross profit control account on December 2007 should be:
A) $525 B) $210 C) $159 D) $315
Answer: B
112) Given the following data for a firm which uses the percentage of completion method on long-term
construction contracts, determine the ending balance of the account which is the net of Construction-
in-Process, and Billings on Contracts, at the end of Year 1, the first year of this project.
Costs incurred = $20,000

Billings = $26,000
Cash collected = $15,000
Estimated remaining cost to complete, as of 12-31-2001 = $30,000
Contract price = $60,000
A) Billings in excess of costs $2,000 B) Billings in excess of costs $667

C) Costs in excess of billings $5,000 D) Costs in excess of billings $14,000
Answer: A
16
113) The January 1, 2006 status of long-term construction project No. 6 follows. Assume the completed
contract method.
Costs incurred to date = $20,000

Estimated remaining cost to complete = $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?
A) $45,000 B) $30,000 C) $50,000 D) $40,000
Answer: A
114) Which of the following would be used in the calculation of the income recognized in the third and
final year of a construction contract which is accounted for using the percentage-of-completion
method?
Contract Price Actual Total Costs Income Previously

Recognized
1 Yes No Yes
2 No No Yes
3 Yes Yes No
4 Yes Yes Yes
A) Choice 1 B) Choice 2 C) Choice 3 D) Choice 4

Answer: D
115) The completed contract method of accounting for long-term construction-type contracts is
preferable when:
A) The contracts are of a relatively long duration.
B) Estimates of costs to complete and extent of progress toward completion are reasonably
dependable.
C) A contractor is involved in numerous projects.
D) Lack of dependable estimates or inherent hazards cause forecasts to be doubtful.
Answer: D
17
116) When progress billings are sent on a long-term contract, what type of account should be credited
under the completed contract method and percentage-of-completion method?
Completed contract Percentage-of-completion

1 Contra asset Revenue
2 Contra asset Contra asset
3 Revenue Revenue
4 Revenue Contra asset
A) Choice 1 B) Choice 2 C) Choice 3 D) Choice 4

Answer: B
117) The percentage-of-completion method of accounting for long-term construction-type contracts is

preferable when:
A) A contractor is involved in numerous projects.
B) The collectability of progress billings from the customer is reasonably assured.
C) The contracts are of a relatively short duration.
D) Estimates of costs to complete and extent of progress toward completion are reasonably
dependable.
Answer: D
118) A sale should NOT be recognized as revenue by the seller at the time of sale if:
A) the goods are sold on credit.
B) the buyer has a right to return the product and the amount of future returns cannot be
reasonably estimated.
C) payment was made by cheque.
D) the selling price is less than the normal selling price.
Answer: B
119) Company X has a machine with a book value of $10,000 and a fair value of $15,000. Company Y
has a machine with a book value of $16,000 and a fair value of $14,000. Company X and Y
exchange machines. In addition, Company X gives $1,000 to Company Y as a result of the
exchange. The transaction is deemed to have commercial substance and the fair value measurement
of the assets are equally reliable. Company X would record the machine acquired from Company Y
at:
A) $16,000. B) $15,000. C) $14,000. D) $10,000.
Answer: B
18
120) Company X has a machine with a book value of $10,000 and a fair value of $15,000. Company Y
has a machine with a book value of $10,000 and a fair value of $9,000. Company X and Y
exchange machines. In addition, Company X gives $1,000 to Company Y as a result of the
exchange. The transaction is deemed to lack commercial substance. Assuming that the book value
method is used, Company X would record:
A) no gain or loss on this transaction. B) a loss of $2,000 on this transaction.
C) a gain of $1,000 on this transaction. D) a loss of $1,000 on this transaction.
Answer: B
121) When work to be done and costs to be incurred on a long-term contract can be estimated
dependably, which of the following methods of revenue recognition is preferable?
A) Completed-contract method. B) Instalment method.
C) Percentage-of-completion method. D) None of these answers are correct.
Answer: C
122) The criteria for recognition of revenue at completion of production of precious metals and farm
products include:
A) units of production are interchangeable.
B) low additional costs of completion and selling.
C) an established market with quoted prices.
D) All of these answers are correct.
Answer: D
123) The method most commonly used to report defaults and repossessions is:
A) record the repossessed merchandise at fair value, recording a gain or loss if appropriate.
B) provide no basis for the repossessed asset, thereby recognizing a loss.
C) record the repossessed merchandise at book value, recording no gain or loss.
D) None of these answers are correct.
Answer: A
19
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
124) A construction company uses the percentage-of-completion method of accounting. In 2007, the
company began work on a government contract, which had a contract price of $4,000,000 and
estimated costs of $3,000,000. Additional data were as follows:
2007 2008
Costs incurred this year $600,000 $2,550,000
Estimated cost to complete as of 2,400,000 -0-
12/31/2007
Billings during the year 720,000 3,080,000
Collections during the year 500,000 3,100,000
Calculate the gross profit to be recognized during 2007.

Answer:
Contract price $4,000,000
Costs incurred during the year $600,000
Estimated costs to complete, as of 12/31/2007 2,400,000
Total estimated costs 3,000,000
Total estimated gross margin $1,000,000
Percentage completion 600,000/3,000,000 20%
Gross profit to be recognized: 20% of $1,000,000 = $200,000
20
125) A construction company has consistently used the percentage-of-completion method of recognizing
income. In 2007, the company started work on a $6,000,000 construction contract, which was
completed in 2008. The accounting records disclosed the following data:
2007 2008
Progress billings $3,800,000 $2,200,000
Estimated cost to complete as of 12/313,600,000 1,800,000
Billings to the government during the 4,600,000 1,400,000
year
Cash collected during the year 3,600,000
Calculate the amount of income that should have been recognized in 2007.
Answer:
2007
Contract price $6,000,000
Costs incurred during the year $1,800,000
Estimated costs to complete, as of 12/31/2007 3,600,000
Total estimated costs 400,000
Total estimated gross margin $600,000
Percentage completion 1,800,000/5,400,000 33.3%
Gross profit to be recognized: 33.3% of $600,000 = $200,000
126) Under contract, ABC Corporation delivers 500 units to Customer A for $200 each on 1 March.
ABC's documented policy is to allow a customer to return any unused product within 30 days and
receive a full refund. The cost of each product is $150. Based on historical experience, ABC
estimates that 2% of the units will be returned. ABC expects that the returned products can be
resold. On March 15th, the customer returned 8 units to ABC. No other returns were received
during the month.
Required: Record all of ABC Inc' journal entries for the month.
Answer: 1 March:
Dr. Accounts Receivable (500 × $200) 100,000

Cr. Revenue 98,000
Cr. Refund liability 2,000
Dr. Cost of goods sold 73,500

21
Dr. Right to recovery asset 1,500
Cr. Inventory (500 × $150) 75,000
15 March:
Dr. Refund liability (8 × $200) 1,600

Cr. Accounts receivable (or cash) 1,600
Dr. Inventory (8 × $150) 1,200

Cr. Right to recovery asset 1,200
31 March:
Dr. Refund liability (2 × $200) 400

Cr. Revenue 400
Dr. Cost of goods sold (2 × 150) 300

Cr. Right to recovery asset 300
127) Under contract, ABC Corporation delivers 500 units to Customer A for $200 each on 1 March.
ABC's documented policy is to allow a customer to return any unused product within 30 days and
receive a full refund. The cost of each product is $150. ABC expects that the returned products can
be resold. On March 15th, the customer returned 8 units to ABC. No other returns were received
during the month.
Required: Record all of ABC Inc' journal entries for the month, assuming that ABC cannot
reasonably estimate the amount of returns on March 15th.
Answer: 1 March:
Dr. Accounts Receivable (500 × $200) 100,000

Cr. Refund liability 100,000
Dr. Right to recovery asset 75,000

Cr. Inventory (500 × $150) 75,000
15 March:
22
Cr. Accounts receivable (or cash) 1,600
Dr. Inventory (8 × $150) 1,200

31 March:

Cr. Revenue 98,400
Dr. Cost of goods sold (92 × 150) 73,800

128) Given the following data, calculate profit recognized in 2007 under the percentage of completion
method for a project begun in 2007 with a contract price of $1,000?
2007 2008
Total estimated costs remaining at 700 400
end of year
Answer:
2007
Contract price $1,000
Costs incurred during the year $100
Estimated costs to complete, as of 12/31/2007 700
Total estimated costs 800
Total estimated gross margin $200
Percentage completion 100/800 12.5%
Gross profit to be recognized: 12.5% of $200 = $25
23
129) On January 1, 2016, XYZ Inc. delivers a machine to a buyer. The agreed-upon price is $9,000.
Included in this price is a twenty-four-month service contract, which stipulates that the system will
be fixed or replaced if it does not perform to certain specifications and 20 hours of service to
maintain the system over this period. The stand-alone price for the maintenance service is $2,000.
The buyer also opted for the twenty-four-month warranty, which XYZ sells separately for $1,000.
The company also estimates that based on past experience, the warranty costs for defective
machinery should be estimated at $450 per year. During Year 1, 8 hours of service are performed, as
expected, at a cost of $800, and warranty work resulted in expenditures of $300.
Required: Using the above information, provide the journal entries required for 2016, assuming
that XYZ uses the revenue deferral approach to account for its warranties.
Answer: Jan 1, 2016

Accounts Receivable 10,000
Revenue 7,000
Contract Liability — Service 2,000
Contract Liability — Warranty 1,000
Dec 31, 2016

Warranty Expense 300
Cash, Parts etc. 300
Service Expense 800
Cash 800

Service Revenue 1,000
Contract Liability — Warranty 500
Warranty Revenue 500
24
130) On January 1, 2016, XYZ Inc. delivers a machine to a buyer. The agreed-upon price is $9,000.
Included in this price is a twenty-four-month service contract, which stipulates that the system will
be fixed or replaced if it does not perform to certain specifications and 20 hours of service to
maintain the system over this period. The stand-alone price for the maintenance service is $2,000.
The company also estimates that based on past experience, the warranty costs for defective
machinery should be estimated at $450 per year. During Year 1, 8 hours of service are performed, as
expected, at a cost of $800, and warranty work resulted in expenditures of $300.
Required: Using the above information, provide the journal entries required for 2016, assuming
that XYZ uses the cost deferral approach to account for its warranties.
Answer: Jan 1, 2016

Accounts Receivable 9,000
Revenue 7,000
Warranty Expense 450

Provision for Warranties 450
Dec 31, 2016

Provision for Warranties 450
Cash/Parts etc. 300
Recovery of Warranty 150
Service Expense 800
Cash 800

Service Revenue 1,000
131) Given the following data, calculate profit recognized in 2008 under the percentage of completion
method for a project begun in 2008 with a contract price of $1,000?
2007 2008
Total estimated costs remaining at end of year 700 400
Answer:
2007
25
Gross profit to be recognized: 12.5% of $200 = $25
2008
Gross profit to be recognized: 300/700 × $300 less $25 = $104
132) A company began work on a government contract at the start of 2007. The contract was to construct a
special building for $4,000,000. In making the bid, construction costs were estimated to be
$3,000,000. Data during the construction period was:
2007 2008
Costs incurred this year $600,000 $2,550,000
Estimated cost to complete as of 2,400,000 -0-
12/31
Billings to the government during the 720,000 3,280,000
year
Cash collected during the year 500,000 3,500,000
How much income on the contract would be reported for each year assuming:
(a) Completed contract method?

2007: $________ 2008: $________.
(b) Percentage-of-completion method? (basis: estimated costs to complete)
2007: $________ 2008: $________.
Answer: (a) 2007: -0- 2008: $4,000,000- $600,000 - $2,550,000 = $850,000
(b) 2007: $1,000,000 × (600/3,000) = $200,000
2008: $4,000,000 - $600,000 - $2,550,000 = $850,000 - $200,000 = $650,000
26
133) A company entered into a contract to construct a building for a fee of $50,000. Construction began in
2006 and was completed in 2008. Transactions related to the contract are summarized below:
2006 2007 2008

Construction costs incurred to date $8,000 $16,600 $15,900
Estimated costs to complete 32,000 16,400 -0-
Billings and collections during year 7,500 20,000 22,500
Compute the income that should be recognized each year using (a) the percentage-of-completion
method and (b) the completed contract method.
[2006 | 2007 | 2008]

(a) $________ $________ $________
(b) $________ $________ $________
Answer: (a) 2006: $10,000 × (8/40) = $2,000
2007: $50,000 - $41,000 = $9,000 × (24,600/41,000) = $5,400 - $2,000 = $3,400
2008: $50,000 - $8,000 - $16,600 - $15,900 - $2,000 - $3,400 = $4,100
b) 2001 and 2002: zero
2003: $50,000 - $8,000 - $16,600 - $15,900 = $9,500
27
134) A construction company entered into a three-year contract to erect a building for a customer. Its
original bid on the job was for $3,600,000 but this was revised upward in year 3 to $3,900,000
because the customer negotiated for some "extras" (modification in the original specifications). A
cumulative history of costs incurred and cost expectations throughout the three years the contract was
in progress is set out below. Give the income to be reported (a) using the percentage-of-completion
method, and (b) using the completed contract method.
Year 1 Year 2 Year 3

Expected revenues $3,600,000 $3,600,000 $3,900,000
Actual costs (cumulative) 750,000 2,550,000 3,270,000
Expected future costs 2,250,000 525,000 -0-
(a) Income using percentage-of-completion

(b) Income using completed contract
Answer:
(a) (b)
Percentage of Completed Contract
Completion
Year 1: $3,600,000 - $750,000 -
$2,250,000
$600,000 x ($750 / $3,000) = $150,000 $-0-
Year 2: $3,600,000 - $2,550,000 -
$525,000
$525,000 x (2,250 / 3,075) - $285,366 $-0-
$150,000 =
Year 3: $3,900,000 - $3,270,000
=$630,000
$630,000 - $150,000 - $285,366 = $194,634 $630,000
135) A shipyard contracted with a foreign government to build a small naval vessel. The contract calls for
the foreign government to pay the shipyard $10,000,000 upon the completion and delivery of the
vessel in 2008. The shipyard engineers estimated the costs to complete the vessel at $8,200,000.
Under each of the situations that follow, show the income that would have to be reported assuming
the percentage-of-completion method is used to recognize income. Show your computations.
a. Income to be reported in 2006, assuming $2,000,000 has been spent and the engineers estimate an
additional $6,800,000 will be spent to complete the vessel. 2001 income that should be reported is
(pick one below):
$280,000
$272,727
$1,200,000
28
Computations:
b. Income to be reported in 2007, assuming $6,000,000 has already been spent and the engineers
estimate an additional $3,4000,000 will be spent to complete the vessel. 2007 income is (pick one
below):
$110,252
$382,978
$548,936
Computations:
c. Income to be reported in 2008, assuming $8,800,000 has already been spent to complete and
deliver the vessel to the foreign government, which immediately paid their bill. 2008 income is (pick
one below):
$961,022
$777,332
$600,000
$1,200,000
$817,021
Computations:
Answer: (a) ($10,000,000 - $8,800,000 × ($2,000/$8,800) = $272,727
(b) ($10,000,000 - $9,400,000 × ($6,000/$9,400) - $272,727 = $110,252
(c) ($10,000,000 - $8,800,000) - $272,727 - $110,252 = $817,021
29
136) The following data are available from a company for a long-term construction contract:
2006 2007 2008

Construction costs incurred to date $400,000 $1,600,000 $1,900,000
Estimated costs to completion 1,400,000 450,000
The contract price for the three-year contract was $2,100,000 and the estimated cost at the beginning
of the contract was $1,800,000.
(a) What is the amount of income that will be reported under the percentage-of-completion method in
2006?
$
(b) What is the amount of income that will be reported under the percentage-of-completion contract
method for 2007?
$
(c) What is the amount of income that will be reported under the percentage-of-completion contract
method for 2008?
$
Answer: (a) ($2,100,000 - $1,800,000 × ($400/$1,800) = $66,667
(b) ($2,100,000 - $2,050,000 × ($1,600/$2,050) - $66,667 = $27,643 loss
(c) ($2,100,000 - $1,900,000 - $66,667 + $27,643 = $160,976
137) The records of a construction company provided the following data on along-term construction
contract (3 years), which was just completed.
Construction contract price. $1,425,000
Estimated total cost (at start). $1,200,000
At end of 2001 At end of 2002 At end of 2003

Costs incurred to date:
(cumulative) $300,000 $480,000 $1,245,000
Estimated cost to complete 900,000 750,000 Completed
Progress billings to date:
(cumulative) 240,000 465,000 1,425,000
Progress collections to
date:
(cumulative) 210,000 450,000 1,425,000
Complete the following partial financial statements for each year (assume percentage-of-completion is
based on costs incurred to total costs) (Hint: complete CC for all years, then complete PC)*:
2001 2002 2003

CC30 PC CC PC CC PC
CC PC CC PC CC PC
Income Statement Income on construction $ ___ $ ___ $ ___ $ ___ $ ___ $ ___
Balance Sheet Accounts receivable ___ ___ ___ ___ ___ ___
Inventory Construction in process ___ ___ ___ ___ ___ ___
Less ___ ___ ___ ___ ___ ___
Costs in excess of billings ___ ___ ___ ___ ___ ___
*CC = Completed contract; PC = Percentage of completion.

Answer:
2001 2002 2003
CC PC CC PC CC PC
Income $-0- $56,250 $-0- $19,848 $180,000 $103,902
Statement
Income on
construction
Balance Sheet 30,000 30,000 15,000 15,000 -0- -0-
Accounts
receivable
Inventory 300,000 356,250 480,000 556,098 -0- -0-
Construction in
process
Less 240,000 240,000 465,000 465,000 -0- -0-
Costs in excess of 60,000 116,250 15,000 91,098 -0- -0-
billings
2001: ($1,425,000 - $1,200,000) × ($300/$1,200) = $56,250

2002: ($1,425,000 - $1,230,000 × ($480/$1,230) - $56,250 = $19,848
2003: $1,425,000 - $1,245,000 = $180,000 - $56,250 - $19,848 = $103,902
138) On January 1, 2007, a contractor started a construction project for $1,350,000; estimated construction
costs (total) were $1,050,000. Data for the two-year period:
2007 2008
Actual construction costs during the year $600,000 $465,000
Estimated remaining costs to complete the contract 450,000 -0-
Actual amount billed to the customer during the year 540,000 810,000
Actual cash collected from the customer during the year 525,000 825,000
Based upon the above data, provide the following amounts for each method:
Completed Contract Percentage-of-Completion

2007 2008 2007 2008
31
(a) Income on construction $ $ $ $
(b) Construction in progress $ $ $ $
(c) Costs in excess of billings $ $ $ $
Answer:
Completed Contract Percentage-of-Completion
2007 2008 2007 2008
(a) Income on -0- $285,000 $171,429c $113,571d
construction
(b) Construction in $600,000 -0- $771,429 -0-
progress
(c) Costs in excess of $60,000a -0- $231,429 -0-
billings
(a) $600,000 - $540,000 = $60,000

(b) $1,350,000 - $1,065,000 = $285,000
(c) ($1,350,000 - $1,050,000) × (600/1,050) = $171,429
(d) $285,000 - $171,429 = $113,571
139) A construction company signed a contract to build a plant for a customer. Construction covered a
four-year period. Data concerning the construction were as follows:

Estimated costs = $600,000
Actual results:
Actual costs Billings

Year 1*. $120,000 $100,000
Year 2*. 100,000 110,000
Year 3*. 240,000 240,000
Year 4*. 160,000 330,000
*No change in estimated costs.

Using the information above, answer the following questions:
(a) How much income will be reported in Years 1, 2, 3, and 4 if the completed contract method is
used?
Year 1: $
Year 2: $
Year 3: $
32
Year 4: $
(b) How much income will be reported each year if the percentage-of-completion method is used?
Year 1: $
Year 2: $
Year 3: $
Year 4: $
(c) What net amount would be reported on the balance sheet for contracts in process at the end of year
1 if the completed contract method is used?
$
(d) What net amount would be reported on the balance sheet for contracts in process at the end of year
1 if the percentage-of-completion method is used?
$
Answer: (a) Year 1: $ -0-
Year 2: $ -0-
Year 3: $ -0-
Year 4: $780,000 - $120,000 - $100,000 - $240,000 - $160,000 = $160,000
(b) Year 1: ($780,000 - $600,000) × ($120/$600) = $36,000
Year 2: ($780,000 - $600,000) × ($220/$600) - $36,000 = $30,000
Year 3: ($780,000 - $600,000) × ($460/$600) - $36,000 - $30,000 = $72,000
Year 4: $780,000 - $620,000 = $160,000 - $36,000 - $30,000 - $72,000 = $22,000
(c) $120,000 - $100,000 = $20,000
(d) $120,000 + $36,000 - $100,000 = $56,000
140) On June 15, 2007, AB Construction Company signed a $180,000 contract to build a small structure
for XY Company. AB estimated that total cost to construct would be $160,000. Construction started
immediately because the required completion date was August 31, 2008. AB's relevant data relating to
this construction project were as follows:
2007 2008 Total

Actual cost incurred by year $60,000 $102,000
Estimated costs to complete 100,000 -0-
Progress billings (to XY) by year 56,000 124,000
Collections (XY) cash by year 55,000 125,000
Required:
1. How much income should AB recognize each year, assuming:
Method Used For 2007 33 For 2008

Method Used For 2007 For 2008
(a) Completed contract $ $
(b) $ $
Percentage-of-completion
2. What amounts should AB report on the balance sheet at the end of each year for:
(a) Accounts (billings) receivable assuming: 12/31/2007 12/31/2008

Completed contract method $ $
Percentage-of-completion method $ $
(b) Construction in process, assuming: 12/31/2007 12/31/2008
Completed contract method $ $
Percentage completion method $ $
3. Give the entry to record income for 2007, assuming the percentage-of-completion method is used.
Answer: 1.
Method Used For 2007 For 2008

(a) Completed contract -0- $18,000
(b) $7,500* $10,500**
Percentage-of-completion
*(180,000 - $160,000) × 60/160 = $7,500

**$18,000 - $7,500 = $10,500
2.
(a) Accounts (billings) receivable 12/31/2007 12/31/2008

assuming:
Completed contract method $1,000 -0-
Percentage-of-completion method $1,000 -0-
(b) Construction in process, assuming: 12/31/2007 12/31/2008
Completed contract method:
Construction in process inventory $60,000 -0-

Less: Billings on contracts 56,000 -0-
Cost in excess of billings $4,000 -0-
Percentage completion method:

34
Construction in process inventory $67,500 -0-
Less: Billings on contracts 56,000 -0-
Cost in excess of billings $11,500 -0-
3.
Inventory of construction in process. 7,500
Income from construction. 7,500
or:
Costs of construction 60,000

Construction in process 7,500
Construction income 67,500
141) On January 1, 2007, a corporation signed a contract to build a specially designed plant; the relevant
data were (in 000's):

Estimated total construction cost = $10,500
Data during construction period (January, 1, 2007-December 31, 2008):
12/31/2007 12/31/2008
Actual cost to date (cumulative) $2,160 $10,875
Actual progress billings to date 2,100 13,500
(cumulative)
Actual collections to date (cumulative) 2,055 13,500
Estimated remaining cost to complete 8,640 -0-
Required:
(1) Give the following amounts that should be reported on the income statement and balance sheet:
Item Completed Contract Percentage-of-Completion

2007 2008 2007 2008
(a) Income from
construction
(b) Accounts receivable
(c) Invoice construction
35
(net asset)
(2) Give the entry to record 2007 construction income at December 31, 2008, for the
percentage-of-completion method.
Answer: 1.
Item Completed Contract Percentage-of-Completion

2007 2008 2007 2008
(a) Income from -0- $2,625a $540d $2,085g
construction
(b) Accounts receivable $45b -0- $45e -0-
(c) Invoice construction $60c -0- $600f -0-
(net asset)
a. $13,500 - $10,875 = $2,625

b. $2,100 - $2,055 = $45
c. $2,160 - $2,100 = $60
d. $13,500 - $2,160 - $8,640 = $2,700 × ($2,160/$120,800) = $540
e. $2,100 - $2,055 = $45
f. $60/$540 = $600
g. $2,625 - $540 = $2,085
2.
Inventory of construction in process 540
Income from construction 540
or:
Costs of construction 2,160

Construction in process 540
Construction income 2,700
36
142) A large construction firm, which uses the percentage of completion method, provided the following
information concerning one of its contracts (contract price, $1,000).
Year 1 Year 2 Year 3

Cost incurred in year $200 $300 $250
Remaining cost to complete at
end of year
Refer to the following two questions. The answer to question (b) depends on the answer to (a).
(a) What is the balance in construction in process at the end of year 1?

(b) Assume that $600 is the estimated remaining cost at the end of year 2. Provide the entry to record
revenue for year 2. Explain the ending balance in construction in process.
Answer: (a) $200 + ($200/$600)($1,000 - $600) = $333
(b)
Construction expense 300

Construction in process 8*
Construction revenue 292**
** Revenue recognized in year 1 = $1,000($200/$600) = $333

($500/$800)$1,000 - $333 = $292
through year 2 = ($500/$800)($1,000 - $800) = $125
Profit in year 1 = ($200/$600)($1,000 - $600) = 133
Loss recognized in year 2 (not an overall loss) = $8
The balance in construction in process at the end of year 2 represents total cost to date ($500)
plus total profit to date ($125) or $625
143) A company sold goods for $100,000 during 2007. Of this amount, $60,000 was cash and $40,000
was on account. The company collected $20,000 of the sales on account during 2001. In conformity
with the revenue principle, the amount of revenue that should be recognized in 2007 is ________.
Answer: $100,000, the revenue earned.
37
144) A company incurred the following costs and received the following collections from customers:
Costs Collections
2001 $120,000 -0-
2002 20,000 $80,000
2003 20,000 40,000
2004 10,000 100,000
2005 -0- 8,000
(a) If the company used the cost recovery method of revenue recognition, the income that should be
recognized in 2003 is ________.
(b) If the cost recovery method continues to be used through 2004, the amount of 2004 income that
should be recognized is ________.
Answer: (a) -0- cost still exceeds revenue.
(b) Costs through 2004 are $170,000. Collections exceeds costs by $220,000 - $170,000 =
$50,000.
145) The following data relates to a firm, which grants a liberal right of return to its customers:
Total credit sales for the year $100,000

Gross profit percentage 40%
Collections on account $60,000
Actual returns during the year $20,000
Accounts receivable for which the return privilege has yet $5,000
to expire as of the year-end
The firm is unable to estimate returns
Required:
(a) The summary entries to account for sales-related transactions during the year, and any adjusting
entries (assume a perpetual inventory system).
(b) The relevant ending balance sheet accounts, and the income statement.
(c) The entry during the following year assuming the $5,000 of goods is returned before the return
privilege expired.
(d) The entry during the following year assuming the return privilege expired on the $5,000 of
accounts receivable.
38
Answer: (a) Entries during the year:
Accounts receivable 100,000

Sales 100,000
Cost of goods sold 60,000
Inventory 60,000
Cash 60,000
Sales returns 20,000
Inventory 12,000
Adjusting journal entry:
Sales 5,000
Deferred gross profit 2,000
(b) Balance sheet accounts, ending balances
Accounts receivable $20,000

Deferred gross profit (2,000)
Net accounts receivable $18,000
Income Statement
Sales $95,000
Net sales 75,000
Gross profit 30,000
(c) Entry assuming return before privilege expires
Inventory 3,000
39
(d) Entry assuming return privilege expires

Sales 5,000
146) The following data relates to a firm, which grants a liberal right of return to its customers:
Total credit sales for the year $100,000

Gross profit percentage 40%
Collections on account $60,000
Actual returns during the year $20,000
Accounts receivable for which the return privilege has yet $15,000
to expire as of the year-end
The firm anticipates a 30% total

sales return rate and all other
criteria are met.
Required:
(a) The summary entries to account for sales-related transactions during the year, and any adjusting
entries (assume a perpetual inventory system).
(b) The relevant ending balance sheet accounts, and the income statement.
(c) The entry during the following year assuming that $10,000 of goods is returned before the return
privilege expired.
(d) The entry during the following year assuming that only $8,000 of goods are returned before the
return privilege expired.
Answer: (a) Entries during the year:

Sales 100,000
Inventory 60,000
Cash 60,000
Inventory 12,000
40
Adjusting journal entry:
Estimated sales returns 10,000*

*.30($100,000) - $20,000 actual returns

(b) Balance sheet accounts, ending balances
Sales $100,000
Sales returns 30,000*
Net sales 70,000
Gross profit 28,000
*Includes estimated and actual returns

(c) Entry assuming $10,000 of goods are returned the following year
Inventory 6,000
(d) Entry assuming $8,000 of goods are returned the following year
Inventory 4,800
Sales 2,000
147) A firm sold merchandise costing $600 for $1,000 on January 1, 2001. The selling firm accepted a
note with terms calling for two equal annual payments (which include 10% interest, and principal)
beginning December 31, 2001. There is sufficient uncertainty about the realizability of the two
payments to warrant the instalment method of revenue recognition.
Required: assuming the 2 payments were received as expected, provide the entries to account for the
sale and cash collections (assume a perpetual inventory system).
Answer: Payment amount: $1,000 = P(PVA,10%,2) = P(1.73554) P = $576
Jan. 1, 2001
Notes receivable 1,000
41
Instalment sales 1,000
Cost of goods sold 600
Inventory 600
Dec.31,2001
Instalment sales 1,000

Cost of goods sold 600
Deferred gross profit 400
Cash 576
Interest revenue 100 .10($1,000)
Notes receivable 476
Deferred gross profit 190 ($576 - $100).40
Realized gross profit 190
Dec. 31, 2002
Cash 576
Interest revenue 52 .10($1,000 -
$476)
Notes receivable 524
Deferred gross profit 210 ($524).40
Realized gross profit 210
148) The following information relates to the sale of an item of merchandise:
Selling price = $100

Cost = $70
Cash collected on sale to date = $40
For each of the independent revenue recognition situations below, determine the net balance in
accounts receivable given the above information, and provide an interpretation of each.
(1) The right of return on the sale has not expired; all criteria of CICA Handbook Sec. 3400 are met
and this item is not expected to be returned.
(2) The right of return on the sale has not expired; not all criteria of CICA Handbook, Sec. 3400 are
met.
(3) The instalment method of revenue recognition is used to account for the sale.
(4) The cost recovery method of revenue recognition is used to account for the sale.
(5) Answer (4) assuming $80 cash has been collected to date.
42
Answer: (1) Net accounts receivable = $100 - $40 = $60. Because all criteria of CICA Handbook, Sec.
3400 are met, and this item is not expected to be returned, the entire sale is recognized. The $60
is that portion of the sales price yet to be collected.
(2) Net accounts receivable = $30, the cost of the item not yet reimbursed. Because not all
criteria of CICA Handbook, Sec. 3400 are met and the right of return privilege has not expired,
the account receivable is shown at $100 - $40 cash collected - $30 gross profit on the sale
(which cannot be recognized at this point). Measurement of the remaining receivable at selling
price would imply recognition of revenue.
(3) Recognized gross profit to date =.30($40) = $12. The remaining $18 of gross profit cannot
be recognized before collection. Net accounts receivable = $100 - $40 - $18 = $42 or $60(1
-.3). This is the amount owed by the customer measured at cost.
(4) No gross profit has been recognized to date as the costs have not been recovered. Therefore,
net accounts receivable equals the cost yet to be reimbursed, $100 - $40 - $30 gross profit =
$30. To this point, the $40 cash plus the $30 net accounts receivable has replaced $70 of
inventory in the balance sheet of the seller.
(5) $10 of gross profit may now be recognized (the excess of $80 cash collected over the $70
cost of the item). $20 of gross profit remains to be recognized. Therefore, net accounts
receivable = $100 - $80 cash collected - $20 gross profit yet to be recognized = $0. The
recognition of the remaining $20 of profit is holding up the recognition of the remaining $20
of asset, until collection. To recognize a net receivable would imply profit recognition before
cash collection, a contradiction of the method. As additional amounts are collected, they will
be recognized as revenue.
149) A firm using the instalment method of revenue recognition repossessed an item it sold for $40,000
(cost $24,000) after the customer stopped remitting cash. Only $26,000 was paid by the customer to
the date of repossession at which time the item is worth only $8,000.
(1) Determine the accounting gain or loss on repossession.

(2) Determine the economic gain or loss–the change in the value of the firm–as a result of the sale and
repossession.
(3) Reconcile total accounting earnings with the value you computed in (2).
Answer: (1) Gross profit percentage = (40 - 24)/40 =.40
Net accounts receivable = $14,000(1 -.40) = $8,400
Market value of item 8,000
Loss on repossession $400
(2) Economic or out-of-pocket gain = $26,000 cash received + $8,000
market value - $24,000 cost of the item = $10,000 gain.
(3) Gross profit recognized on sale = $26,000(.40) = $10,400
Loss on repossession from (1) = $400
Net increase in accounting earnings = $10,000
This amount equals the economic gain in (2). Thus the accounting earnings, although they may
be recognized in more than one period, equal the economic value change.
43
150) Under the percentage of completion method, a company has recognized $40,000 of profit through to
the beginning of the current year on a contract, and total estimated contract cost is $500,000 at that
time. The contract price is $800,000. Calculate the percent of completion at the beginning of the
current year.
Answer:
Total estimated costs 500,000
Total estimated gross margin $300,000
Gross profit recognized to date 40,000

151) Given the following data for a firm which uses the percentage of completion method on long-term
construction contracts, determine the ending balance of the account which is the net of Construction in
Process, and Billings on Contracts, at the end of Year 1, the first year of this project.
Costs incurred $20,000

Billings 26,000
Cash collected 15,000
Estimated remaining cost to complete, as of 12-31-2001 30,000
Contract price 60,000
Answer: Contract price = $60,000

Costs incurred = $20,000
Estimated remaining cost to complete,
As of 12-31-2001 = $30,000
Total estimated costs = $50,000
Total estimated gross profit = $10,000
Gross profit recognized 20,000/50,000 × 10,000 = 4,000

Construction is process is cost plus gross profit
Costs incurred 20,000

Gross profit to date 4,000
Total inventory 24,000
Less billings on contract 26,000
Excess of billings over cost 2,000
44
152) In 2005, Tamarack Corporation began construction work under a three-year contract. The contract
price is $1,200,000. Evian uses the percentage of completion method for financial accounting
purposes. The income to be recognized each year is based on the proportion of cost incurred to total
estimated costs for completing the contract. The financial statement presentations relating to this
contract at December 31, 2005, follow:
Balance Sheet:
Contract billings $50,000
Construction in progress $150,000
Less contract billings 120,000
Cost of uncompleted contract in excess of $30,000
billings
Income Statement:
Income (before tax) on the contract recognized $30,000
in 2005
Accounts receivable construction
Calculate how much cash was collected in 2005 on this contract.

Answer:
Contract billings $120,000
Ending balance in accounts receivable 50,000
Collections on account during 2005 $70,000
45
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denticulations; shell more or less acuminate, small, aperture entire,
operculum corneous or calcareous. Brackish or fresh water. Jurassic
——. Principal genera: Baicalia, with its various sub-genera (p. 290);
Pomatiopsis, Hydrobia, Bithynella, Micropyrgus (Tertiary), Pyrgula,
Emmericia, Benedictia, Lithoglyphus, Tanganyicia, Limnotrochus (?),
Jullienia, Pachydrobia, Potamopyrgus, Littorinida, Amnicola,
Fluminicola (subg., Gillia, Somatogyrus), Bithynia, Fossarulus
(Tertiary), Stenothyra.
Fam. 18. Assimineidae.—Ctenidium replaced by a pulmonary sac,
no true tentacles, eye-peduncles long, retractile; radula that of
Hydrobia; shell small, conoidal, operculum corneous, nucleus sub-
lateral. Eocene——. Genera: Assiminea, Acmella.
Fam. 19. Skeneidae.—Radula resembling that of Hydrobia; shell
very small, depressed, widely umbilicated, operculum corneous.
Pleistocene——. Single genus, Skenea.
Fam. 20. Jeffreysiidae.—Mantle with two pointed ciliated
appendages in front, tentacles ciliated, eyes sessile, far behind the
base of the tentacles; marginal teeth sometimes absent; shell small,
thin, pellucid, whorls rather swollen, operculum with marginal
nucleus, divided by a rib on the inner face. Recent. Genera:
Jeffreysia, Dardania. Marine, living on algae.
Fam. 21. Litiopidae.—Epipodium with cirrhi on each side,
operculigerous lobe with appendages; radula rissoidan; shell small,
conical, columella truncated, operculum corneous. Eocene——.
Genera: Litiopa, living on the Sargasso weed, suspended by a long
filament; Alaba, Diala.
Fam. 22. Adeorbidae.—Radula essentially rissoidan; shell
depressed, circular or auriform, widely umbilicated, operculum
corneous, paucispiral, nucleus excentrical. Pliocene ——. Principal
genera: Adeorbis, Stenotis, Megalomphalus.
Fam. 23. Viviparidae.—Snout blunt, tentacles long, right tentacle
in the male deformed, pierced with a hole corresponding to the
aperture of the penis, two cervical lobes, the right being siphonal,
foot with an anterior transverse groove; teeth broad, shallowly
pectinate at the ends; shell turbinate, whorls more or less rounded,
aperture continuous, operculum corneous, nucleus sub-lateral, with
a false sub-central nucleus on the external face. Animal
ovoviviparous. Fresh-water. Cretaceous ——. Genera: Vivipara (=
Paludina), subg., Cleopatra, Melantho, Tulotoma; Tylopoma
(Tertiary), and Lioplax.
Fam. 24. Valvatidae.—Branchia exserted, bipectinate, carried on
the back of the neck, a filiform appendage (Fig. 66, p. 159) on the
right of the neck, penis under the right tentacle, prominent, eyes
sessile, behind the tentacles; radula like that of Vivipara; shell small,
turbinate or flattened, operculum corneous, nucleus central. Fresh
water. Jurassic ——. Single genus, Valvata.
Fam. 25. Ampullariidae.—Snout with two tentacles, tentacles
proper very long, tapering, eyes prominently pedunculate, two
cervical lobes, the left siphonal, respiratory cavity divided by a
partition, a large branchia in the right chamber, the left functioning as
a pulmonary sac (Fig. 65, p. 158); radula large, central tooth
multicuspid, base broad, lateral and marginals falciform, simple or
bicuspid; shell large, turbinate or flattened, spire small, whorls
rounded; operculum generally corneous, nucleus sub-lateral, false
nucleus as in Vivipara. Fresh water. Cretaceous ——. Single genus,
Ampullaria (subg., Ceratodes, Pachylabra, Asolene, Lanistes, and
Meladomus).
Fam. 26. Cerithiidae.—Branchial siphon present, short, eyes
variable in position; central tooth small, evenly cusped, lateral
hollowed at base, multicuspid, marginals narrow; shell long,
turriculate, whorls many, generally tuberculate, varicose or spiny,
aperture sometimes strongly channelled; operculum corneous,
subcircular, nucleus nearly central. Marine or brackish water. Trias
——. Principal genera: Triforis, shell small, generally sinistral;
Fastigiella, Cerithium (Fig. 12, p. 16), Bittium, Potamides (subg.,
Tympanotomus, Pyrazus, Pirenella, Telescopium, Cerithidea,
Lampania, all brackish water), Diastoma (Eocene), Cerithiopsis;
Ceritella (Jurassic), Brachytrema (Jurassic), and Planaxis (subg.,
Quoyia and Holcostoma).
Fam. 27. Modulidae.—No siphon, radula of Cerithium; shell with
short spire, columella strongly toothed at the base, aperture nearly
circular. Recent. Single genus, Modulus.
Fam. 28. Nerineidae.—Shell solid, long, sub-cylindrical, aperture
channelled, columella and interior of whorls with continuous ridges,
extending up the spire. Genera: Nerinea (Trias to Cretaceous),
Aptyxiella (Jurassic).
Fam. 29. Melaniidae.—Border of mantle festooned, foot broad,
with an anterior groove, penis present; radula closely resembling that
of Cerithium; shell long, spiral, with a thick periostracum, surface
with tubercles, ribs, or striae, suture shallow; operculum corneous,
paucispiral, nucleus excentrical. Animal ovoviviparous. Fresh water.
Cretaceous ——. Principal genera: Melania (with many sections or
sub-genera), Pachychilus, Claviger (= Vibex), Hemisinus, Pirena,
Melanopsis, Tiphobia, Paludomus (subg., Philopotamis, Tanalia,
Stomatodon), Hantkenia (Eocene), Larina (?).
Fam. 30. Pleuroceridae.—Mantle edge not festooned, no
copulatory organ, otherwise like Melaniidae; operculum with nucleus
sub-marginal. Animal oviparous. Fresh-water. Cretaceous ——.
Genera: Pleurocera (including Io, Fig. 12, p. 16, Angitrema, Lithasia,
Strephobasis), Goniobasis, Anculotus, Gyrotoma.
Fam. 31. Pseudomelaniidae.—Shell resembling that of
Melaniidae, but marine. Genera: Pseudomelania, Loxonema,
Bourguetia, Macrochilus. Palaeozoic to Tertiary strata.
Fig. 275.—Melania confusa
Dohrn, Ceylon.
Fam. 32. Turritellidae.—Mantle with a siphonal fold on the right
side; radula variable (p. 224); shell long, whorls many, slowly
increasing in size, transversely ribbed or striated, aperture small;
operculum corneous, nucleus central. Jurassic ——. Principal
genera: Turritella, Mesalia, Protoma, Mathilda (?).
Fam. 33. Coecidae.—Tentacles long, eyes sessile at their base;
shell small, spiral in the young form, spire generally lost in the adult,
the shell becoming simply a straight or curved cylinder; operculum
corneous, multispiral. Eocene ——. Single genus, Coecum.
Fam. 34. Vermetidae.—Visceral sac greatly produced, irregularly
spiral, no copulatory organs (radula, Fig. 126, p. 223), shell tubular,
irregularly coiled, last whorls often free, aperture circular; operculum
corneous, circular, nucleus central. Carboniferous ——. Principal
genera: Vermetus; Siliquaria (Fig 153, p. 248), a long fissure, or
series of holes, runs along a considerable part of the shell,
operculum with outer face spiral, elevated.
Fam. 35. Strombidae.—Foot narrow, arched, metapodium greatly
produced, snout long, eye peduncles long, thick, eyes elaborate,
siphon short, penis prominent, bifurcate; central tooth with strong
median cusp, marginals falciform, slender, edge more or less
denticulate; shell solid, spire conical, outer lip generally dilated into
wings or digitations, channelled before and behind, a labial sinus at
the base, distinct from the anterior canal; operculum small for the
aperture, corneous, claw-shaped, edge notched. Lias ——. Genera:
Strombus (Fig. 99, p. 200); Pereiraea (Miocene), Pteroceras (Fig.
277; digitations of the outer lip very strong), Rostellaria (spire
produced, anterior canal very long), Rimella, Pterodonta, Terebellum
(base of shell truncate, spire short).
Fig. 276.—Development of
Coecum: A, showing the
gradual formation of septa;
a, apex; ap, aperture; ss, first
septum; s´s´, second
septum. (After de Folin.) B,
adult form of C. eburneum
Ad., Panama, x 10.
Fam. 36. Chenopodidae (= Aporrhaidae).—Foot flat; lateral and
marginal teeth not denticulate; shell resembling that of Strombus,
outer lip dilated, wing-like, no labial sinus. Jurassic ——. Genera:
Chenopus (= Aporrhais, Diastema, Malaptera, Harpagodes, Alaria)
(last four from Secondary strata).
Fam. 37. Struthiolariidae.—Radula allied to that of Strombus,
marginals occasionally multiplied; shell buccinoid, very solid, outer
lip thickened, canal short, operculum claw-shaped, notched, nucleus
terminal. Tertiary ——. Single genus, Struthiolaria (subg.,
Perissodonta, marginal teeth multiplied).
Fam. 38. Cypraeidae.—Mantle with two large lateral lobes
reflected and meeting over the shell, siphon small; central and lateral
teeth bluntly tricuspid or multicuspid, laterals fairly broad, edges
cusped or finely pectinate; shell polished, solid, spire generally
concealed in the adult or overlaid with enamel, aperture straight,
narrow, nearly as long as the shell, toothed at the sides, channelled
at each end, labium inflected; no operculum. Jurassic ——. Genera:
Ovula (including Amphiperas, Transovula, Cyphoma, Radius,
Simnia), Pedicularia, Cypraea (with subg., Cypraeovula, Cypraedia,
and Trivia), and Erato.
Fam. 39. Doliidae.—Foot expanded, wider and longer than the
shell, truncated and thickened in front, siphon very long and narrow;
central tooth with very strong median and small lateral and basal
cusps, lateral and marginals bluntly falciform; shell ventricose,
without varices, spire short, outer lip generally simple, anterior canal
rather wide, no operculum. Cretaceous ——. Genera: Dolium (subg.,
Malea, outer lip thickened, denticulate, reflected); Pirula, mantle with
two lateral lobes reflected over part of the shell, shell fig-shaped (Fig.
278).
Fig. 277.—Three stages in the growth of

Pteroceras rugosum Sowb., E. Indies,
showing the development of the ‘fingers.’
Fam. 40. Cassididae.—Foot broad, siphon long (radula, Fig. 125,
p. 223); shell ventricose, with varices, spire short, outer lip reflected
or thickened, anterior canal short, recurved narrow; operculum semi-
lunar, with ribs radiating from a marginal nucleus. Cretaceous ——.
Genera: Cassis (subg., Semicassis and Cypraecassis), Morio (=
Cassidaria), Oniscia.
Fam. 41. Columbellinidae.—Shell solid, ribbed, usually
cancellated, with an oblique posterior canal, columella callous, more
or less reflected. Genera: Columbellina, Columbellaria, Zittelia,
Petersia, Alariopsis (?). Secondary strata only.
Fam. 42. Tritonidae.—Foot short, narrow; siphon short, not
prominent; radula allied to that of Cassididae; shell thick, varicose;
outer lip inflected and thickened, canal long, periostracum often thick
and hairy, operculum corneous, nucleus terminal or sub-marginal.
Cretaceous ——. Genera: Triton (Fig. 191, p. 275; subg., Epidromus,
Plesiotriton, Simpulum, Ranularia, Argobuccinum); Persona,
aperture toothed, narrow; columella reflected upon the last whorl;
Ranella, shell dorso-ventrally compressed, generally with two
continuous lateral varices, posterior canal present.
The position of the following four families is doubtful:—
Fam. 43. Oocorythidae.—Siphon short, foot broad, eyes absent,
radula taenioglossate; shell buccinoid or cassidiform, operculum
corneous, spiral. Recent. Single genus, Oocorys.
Fam. 44. Subulitidae.—Shell elongate, fusiform, smooth; suture
shallow, base truncate or rounded, aperture channelled or notched.
Ordovician to Trias. Genera: Subulites, Fusispira, Euchrysallis.
Fig. 278.—Pirula
Dussumieri Val.,
Philippines. × ½.
Fam. 45. Seguenziidae.—Radula taenioglossate, shell trochiform,
aperture channelled, columella twisted, operculum multispiral,
nucleus central. Pliocene ——. Single genus, Seguenzia.
Fam. 46. Choristidae.—Anterior tentacles united by a frontal veil,
posterior simple; eyes absent, foot with tentaculae before and
behind; three central teeth, outer marginal with a basal plate; shell
helicoid, suture deep, peristome continuous, operculum corneous,
paucispiral. Pliocene ——. Single genus, Choristes.
Section II. Heteropoda.—Foot fin-shaped, not flat.
The Heteropoda are free-swimming Mollusca, being, like the
Pteropoda, Gasteropoda modified to suit their pelagic environment.
Their nervous system is streptoneurous, and they are therefore
probably derived from the Prosobranchiata, but they are highly
specialised forms. Pelseneer considers them far more widely
removed from the Streptoneura than the Pteropoda are from the
Euthyneura. They swim on the surface “upside down,” i.e. with the
ventral side uppermost.
The tissues and shell are transparent, permitting observation of
the internal organs. In the Pterotrachaeidae the foot takes the form
of a fan-shaped disc, usually furnished with a sucker. The body is
compressed at the posterior end, often with a ventral “fin.” In Atlanta
the foot consists of three very distinct parts: a propodium, a
mesopodium, on which is a small sucker, and a metapodium, which
carries the operculum. The branchiae are carried on the visceral sac,
and are free in Pterotrachaea, slightly protected by the shell in
Carinaria, and entirely covered in Atlanta; absent altogether in
Firoloida.
The head carries two tentacles (except in Pterotrachaea), with
large, highly organised eyes on short lobes at their outer base. The
alimentary tract consists of a long protrusible proboscis, with a
taenioglossate radula (Fig. 132, p. 227), a long oesophagus, and a
slightly flexured intestine. In Atlanta the visceral sac is spiral and
protected by a spiral planorbiform shell; in Carinaria the visceral sac
is small, conical, protected by a very thin capuliform shell. There is
no shell in Pterotrachaea or Firoloida.
The Heteropoda are dioecious. In the male there is a flagellum
behind the penis, which is near the middle of the right side.
Pterotrachaea lays long chains of granular eggs, and has been
noticed to produce a metre’s length in a day. The eggs of Atlanta are
isolated. The embryo has a deeply bilobed velum.
Fam. 1. Pterotrachaeidae.—Body long, with a caudal “fin;”
branchiae dorsal, free or partly protected by a shell; foot consisting
of a muscular disc, with or without a sucker.
Pterotrachaea proper has no mantle, shell, or tentacles. The
branchiae are disposed round the visceral sac, at the upper part of
which is the anus. In Firoloida the body is abruptly truncated behind,
with a long filiform segmented caudal appendage; visceral sac at the
posterior end: fin-sucker present or absent in both male and female.
Cardiapoda resembles Carinaria, but the visceral sac is more
posterior and is only slightly protected by a very small spiral shell.
Carinaria (Fig. 279) has a rugose translucent skin, visceral sac sub-
median, apparently pedunculated, covered by a capuliform shell.
The larval shell, which persists in the adult, is helicoid.
Fam. 2. Atlantidae.—Shell spiral, operculate, covering the animal.
Branchiae in a dorsal cavity of the mantle; foot trilobed, with a small
sucker on the mesopodium.
The shell of Atlanta is discoidal and sharply keeled, while that of
Oxygyrus is nautiloid, with the spire concealed, no keel, aperture
dilated.
(c) Gymnoglossa.—Radula and jaws absent; proboscis
prominent, sexes probably separate, penis present. The section is
probably artificial and unnecessary, the families composing it being,
in all probability, Taenioglossa which have lost their radula in
consequence of changed conditions of life (pp. 79, 225).
Fig. 279.—Carinaria mediterranea Lam., Naples: a,

anus; br, branchiae; f, foot; i, intestine; m, mouth;
p, penis; s, sucker; sh, shell; t, tentacles. × ½.
Fam. 1. Eulimidae.—Proboscis very long, retractile, mantle
forming a siphonal fold; shell small, long, subulate, polished; suture
shallow, aperture continuous, operculum present or absent. Animal
often parasitic, sucking the juices of its host by its long proboscis.
Trias——. Genera: Eulima (subg., Subularia, Arcuella, Apicalia,
Mucronalia, Stiliferina, and others), Stilifer, Scalenostoma, Niso, and
Hoplopteron.
Fam. 2. Pyramidellidae.—Tentacles auriform, proboscis as in
Eulimidae, a prominent mentum or flap under the buccal orifice; shell
usually small, conical; suture shallow, apical whorls (the embryonic
shell) sinistral (p. 250), operculum corneous, paucispiral; nucleus
excentrical. Trias——. Genera: Pyramidella (subg., Syrnola,
Otopleura, Chrysallida, Mumiola), Odostomia, Eulimella,
Murchisoniella, Turbonilla (subg., Dunkeria and Cingulina).
(d) Rachiglossa (p. 220).—Proboscis long, retractile; siphon
distinct, radula without uncini, sometimes without laterals; teeth
strongly cusped; shell generally wholly external.
Fam. 1. Muricidae.—Eyes sessile at the outer base of the
tentacles, penis large, behind the right tentacle, radula within the
retractile proboscis, central tooth (Fig. 119, p. 220) with at least three
strong cusps, laterals plain; shell solid, more or less tuberculate,
spiny and varicose, anterior canal varying from a mere notch to a
long channel. Cretaceous——. Principal genera: (i.) Muricinae,
nucleus of operculum sub-terminal; Trophon, Typhis, Murex (with
many subdivisions), Ocinebra (including Cerastoma, Vitularia, and
Hadriania), Urosalpinx, Eupleura, Pseudomurea. (ii.) Purpurinae,
nucleus of operculum lateral; Rapana (including Latiaxis), Purpura
(with subg., Cuma, Iopas, Vexilla, and Pinaxia), Monoceros
(including Chorus), Purpuroidea (Secondary strata), Pentadactylus,
Sistrum, Concholepas.
Fam. 2. Coralliophilidae.—Animal living in Madrepores, resembling
Purpura, radula absent; shell variously shaped, often deformed or
tubular, operculum that of Purpura, if present. Miocene——. Principal
genera: Rhizochilus, Coralliophila, Leptoconchus, Magilus (Fig. 29,
p. 75), Rapa.
Fam. 3. Columbellidae.—(Radula, Fig. 123, p. 222.) Shell small,
solid, fusiform, aperture narrow, canal short, outer lip thickened.
Miocene——. Single genus, Columbella (subg., Nitidella, Anachis,
Meta, Strombina, Atilia, Conidea, Amphissa, Mitrella, and others).
Fam. 4. Nassidae.—Foot long and broad, often with terminal
appendages; siphon long, eyes on outer base of tentacles, central
tooth of radula arched, multicuspid, lateral strongly bicuspid, with
small denticles between the cusps; shell rather small, buccinoid,
columella more or less callous, outer lip thickened, often toothed;
operculum corneous, edges often toothed. Miocene——. Principal
genera: Nassa (with many sections), Amycla, Desmoulea,
Cyclonassa, Canidia (subg., Clea and Nassodonta), Dorsanum,
Bullia (= Buccinanops, Fig. 62, p. 185), Truncaria.
Fam. 5. Buccinidae.—Siphon rather long, eyes at outer base of
tentacles; central tooth of radula with 5 to 7 cusps, laterals bicuspid
or tricuspid (Fig. 118, p. 220); shell more or less fusiform, thick,
covered with a periostracum, canal of varying length, outer lip simple
or thickened; operculum corneous, nucleus variable in position.
Cretaceous——. Principal genera: Group i. Chrysodomus (with
sections Neptunea, Volutopsis, Pyrolofusus, Jumala), subg., Sipho;
Siphonalia (subg., Kelletia). Group ii. Liomesus (= Buccinopsis).
Group iii. Buccinum (Fig. 1 b, p. 6; subg., Volutharpa, Neobuccinum).
Group iv. Cominella, Tritonidea, Pisania, Euthria; Anura (Miocene),
Genea (Pliocene), Metula, Engina. Group v. Phos, Hindsia. Group vi.
Dipsaccus (= Eburna), Macron. Group vii. Pseudoliva.
Fam. 6. Turbinellidae.—Central tooth of radula tricuspid, median
cusp strong, lateral bicuspid, cusps unequal (Fig. 117, p. 220); shell
fusiform or pear-shaped, heavy, canal often long, operculum
corneous, claw-shaped, nucleus terminal. Miocene——. Principal
genera: Turbinella, Cynodonta, Tudicla (subg., Streptosiphon);
Piropsis (Cretaceous), Perissolax (Cretaceous), Strepsidura
(Eocene, subg., Whitneya), Melapium, Fulgur (= Busycon, Fig. 150,
p. 249, including Sycotypus), Melongena (subg., Pugilina, Myristica);
Liostoma (Eocene), Hemifusus (subg., Megalatractus),
Ptychatractus, Meyeria.
Fig. 280.—Turbinella
pyrum Lam., Ceylon.
× ⅔.
Fam. 7. Fasciolariidae.—Eyes at the outer base of the tentacles
(radula, Fig. 121, p. 221); shell fusiform, spire long, canal often very
long, columella often with a fold at the base; operculum corneous,
nucleus terminal. Cretaceous——. Principal genera: Fusus
(including Sinistralia, Aptyxis, Troschelia), with subg., Serrifusus
(Cretaceous), Clavella (subg. Thersites), Fasciolaria, Latirus (subg.
Polygona, Peristernia, Leucozonia, Lagena; Mazzalina (Eocene),
Chascax).
Fig. 281.—Latirus
(Leucozonia) cingulatus
Wood, Panama.
Fam. 8. Mitridae.—Siphon rather long, with anterior appendages,
eyes on the side of the tentacles, proboscis very long; radula
variable, laterals sometimes lost (Fig. 120, p. 221); shell fusiform,
solid, spire more or less pointed, columella with several prominent
folds, the posterior the largest, aperture rather narrow, no operculum.
Cretaceous——. Principal genera: Mitra (with many sections), subg.,
Strigatella, Mitreola, Mutyca, Dibaphus; Plochelaea (Tertiary), Thala;
Turricula (with several sections), Cylindromitra, and Imbricaria.
Fam. 9. Volutidae.—Foot broad in front, head laterally dilated into
lobes, on which are placed the sessile eyes; siphon prominent, with
appendages at the base (radula, Fig. 122, p. 221); shell thick, often
shining, fusiform, globular or cylindrical, columella projecting
anteriorly, with several folds, the anterior of which is the largest,
aperture notched, canal not produced, operculum generally absent.
Cretaceous——. Principal genera: Cryptochorda (Eocene), Zidona,
Provocator, Guivillea, Yetus (= Cymbium), Voluta (with many
sections), Volutolithes (chiefly Eocene), Volutolyria, Lyria, Enaeta,
Volutomitra.
Fam. 10. Marginellidae.—Foot broad, siphon without appendages,
mantle largely reflected over the shell; radula without laterals, central
tooth comb-like, cusps rather blunt; shell oval or conoidal, polished,
aperture narrow, outer lip thickened, columella with many folds; no
operculum. Eocene——. Principal genera: Marginella, with many
sections and so-called sub-genera; Persicula, Pachybathron (?),
Cystiscus, Microvoluta.
Fig. 282.—Voluta nivosa
Lam., West Australia.
× ⅔.
Fig. 283.—Oliva porphyria

Lam., Panama.
Fam. 11. Harpidae.—Foot large, with a transverse groove,
separating off a semi-lunar propodium; mantle partly reflected over
the shell; shell ventricose, polished; spire short, strongly
longitudinally ribbed, ribs prolonged over the suture, columella
callous; no operculum. Eocene——. Single genus, Harpa (subg.,
Silia).
Fam. 12. Olividae.—Propodium semi-lunar, with a longitudinal
groove above, mesopodium reflected laterally over the shell; central
tooth of radula tricuspid on a very broad base, lateral simple,
hooked; shell sub-cylindrical or fusiform, polished; aperture narrow,
operculum present or absent. Cretaceous——. Principal genera:
Oliva (Figs. 283, and 98, p. 199), Olivancillaria (including Lintricula
and Agaronia), Olivella, Ancilla (subg., Ancillina).
(e) Toxoglossa (p. 218).—Radula with normal formula 1·0·1,
teeth large; oesophagus with a large poison gland; animal
carnivorous, exclusively marine.
Fig. 284.—Terebra
subulata L., Ceylon.
Fig. 285.—Pleurotoma
tigrina Lam., E. Indies.
Fam. 1. Terebridae.—Eyes at the end of the tentacles, shell
subulate, many whorled, operculum with terminal nucleus. Eocene
——. Single genus, Terebra, with several sections.
Fam. 2. Conidae.—Eyes on outer side of tentacles, siphon
prominent; shell conical or fusiform, aperture narrow. Cretaceous
——. Principal genera: Conus, shell solid, spire short, aperture
narrow, straight, internal partitions partly absorbed; Conorbis,
Genotia (with several sections, chiefly Tertiary), Pusionella,
Columbarium, Clavatula, Surcula, Pleurotoma; Borsonia (Eocene),
Drillia (subg., Spirotropis), Bela, Mangilia (including Daphnella,
Clathurella, and others), Halia.
Fam. 3. Cancellariidae.—Proboscis short, usually no radula, shell
oval, columella strongly plicate; no operculum. Cretaceous——.
Single genus, Cancellaria (subg., Merica, Trigonostoma, Admete).
CHAPTER XV
CLASS GASTEROPODA (continued): OPISTHOBRANCHIATA AND
PULMONATA
Order III. Opisthobranchiata

Visceral loop not twisted (except in Actaeon) in a figure of 8
(Euthyneurous type, p. 203), auricle usually behind the ventricle,
ctenidium often replaced by secondary branchiae, pallial cavity, if
existing, more or less open, shell present or absent, operculum
absent (except in Actaeon), animal hermaphrodite, with separate
sexual openings, marine only.—Carboniferous to present time.
The character of their nervous system decisively removes the
Opisthobranchiata from the Prosobranchiata, and approximates
them to the Pulmonata. Actaeon, however, which is streptoneurous,
as well as possessing an operculate shell with prominent spire,
forms an interesting link with the Prosobranchiata. At the opposite
extreme to Actaeon stand forms like Siphonaria and Gadinia, which
are probably close links with the Pulmonata (p. 19). The generative
system of the whole group, which is, as in the Basommatophora, of
the hermaphrodite type, without mutual fecundation, is another link
of connexion with the Pulmonata. The respiratory organs present the
most varied forms, sometimes consisting of one ctenidium (never
two), sometimes of secondary branchiae, variously placed, while
sometimes no special organ exists.
The prolongation of the foot into lateral epipodia or parapodia
(possibly to aid in swimming), and the effect of the epipodia upon the
shell, according as they involve it completely or partially, are among
the most instructive features of the Opisthobranchiata. If the epipodia
are developed on the anterior portion of the body, and do not
become reflected, they may, as in most Pteropoda Thecosomata, not
directly affect the shell. But when, as in the Tectibranchiata, the
epipodia are medio-lateral, and tend to envelope the shell, their
effect may be traced by a series of forms varying in proportion to the
amount of shell-surface covered by the epipodia. The two principal
lines along which modification takes place are the gradual reduction
of the spiral nature of the shell, and the gradual lessening of its
solidity. Both these changes are the direct result of the additional
protection afforded to the visceral mass by the reflected epipodia,
which renders the existence of a shell less and less necessary. A
precisely similar line of change is seen in the Pulmonata, culminating
in forms like Arion (p. 174).
Fig. 286.—Illustrating the transition of form in

the shell of Tectibranchiata from the
pointed spiral to the almost flattened plate:
A, Actaeon; B, Aplustrum; C, Cylichna; D,
Atys; E, Philine; F, Dolabella; G, Aplysia;
H, Pleurobranchus. (Not drawn to scale.)
Fig. 287.—Illustrating the gradual covering of the shell
in the Tectibranchiata by the epipodia and mantle:
A, Haminea; B, Scaphander; C, Aplustrum; D,
Aplysia; E, Philine; c.d, cephalic disc; ep, ep,
epipodia; sh, shell. (Not drawn to scale.)
The habits of life of the Opisthobranchiata are very varied. Some,
especially the heavier types, burrow in sand, and are then usually
furnished with a broad cephalic disc, as a digging apparatus; some
(certain Bulla) flit about in shallow pools on mud flats; others
(Phyllirrhoe and the Pteropoda) swim freely in the open sea; others
(most Nudibranchiata) crawl slug-like on sea-weeds or corallines,
and in colour singularly harmonise with their environment (p. 71 f.);
others again (Siphonaria, Gadinia), stick limpet-like to rocks between
tide marks. As a rule, they occur only in clean salt water, but
Embletonia has been found in the Victoria Docks at Rotherhithe, as
well as in parts of the Baltic, where the water has only 7 parts of salt

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Interactive Developmental Mathematics

1st Edition Rockswold Test Bank

4) The percentage-of-completion method of accounting for long-term construction projects is

10) Collectability must be certain in order for revenue to be recognized.

55) Revenues must always be recognized at a single point in time.

70) Non-monetary transactions by definition involve no exchange of cash.

73) Which of the following would not be considered a multiple-deliverable arrangement?

76) In accounting, the term "revenue recognition" refers to:

92) Under the percentage-of-completion method of income recognition on long-term construction

95) Revenue is recognized at the time of sale under the:

98) Revenue isrecognized prior to the time of sale under the:

A) Choice 1 B) Choice 2 C) Choice 3 D) Choice 4 E) Choice 5

2006 2007 2008

A) $104 B) $61 C) $129 D) $86

A) $400 B) $100 C) $138 D) $38

Total cost incurred till date = $3,000

What profit or loss is recognized in the current year?

Costs incurred = $20,000

A) Billings in excess of costs $2,000 B) Billings in excess of costs $667

Costs incurred to date = $20,000

Contract Price Actual Total Costs Income Previously

A) Choice 1 B) Choice 2 C) Choice 3 D) Choice 4

Completed contract Percentage-of-completion

A) Choice 1 B) Choice 2 C) Choice 3 D) Choice 4

117) The percentage-of-completion method of accounting for long-term construction-type contracts is

Calculate the gross profit to be recognized during 2007.

Percentage completion 600,000/3,000,000 20%

Gross profit to be recognized: 20% of $1,000,000 = $200,000

Percentage completion 1,800,000/5,400,000 33.3%

Gross profit to be recognized: 33.3% of $600,000 = $200,000

Dr. Accounts Receivable (500 × $200) 100,000

Dr. Cost of goods sold 73,500

Dr. Refund liability (8 × $200) 1,600

Dr. Inventory (8 × $150) 1,200

Dr. Refund liability (2 × $200) 400

Dr. Cost of goods sold (2 × 150) 300

Dr. Accounts Receivable (500 × $200) 100,000

Dr. Right to recovery asset 75,000

Dr. Inventory (8 × $150) 1,200

Dr. Refund liability (2 × $200) 98,400

Dr. Cost of goods sold (92 × 150) 73,800

Percentage completion 100/800 12.5%

Gross profit to be recognized: 12.5% of $200 = $25

Answer: Jan 1, 2016

Dec 31, 2016

Contract Liability — Service 1,000

Answer: Jan 1, 2016

Warranty Expense 450

Dec 31, 2016

Contract Liability — Service 1,000

Gross profit to be recognized: 12.5% of $200 = $25

Percentage completion 300/700 42.8%

Gross profit to be recognized: 300/700 × $300 less $25 = $104

(a) Completed contract method?

2006 2007 2008

[2006 | 2007 | 2008]

Year 1 Year 2 Year 3

(a) Income using percentage-of-completion

2006 2007 2008

At end of 2001 At end of 2002 At end of 2003

2001 2002 2003

*CC = Completed contract; PC = Percentage of completion.

2001: ($1,425,000 - $1,200,000) × ($300/$1,200) = $56,250