Review questions Exam 2 with answers Essay example

2547 WordsOct 27, 201411 Pages
PART I MULTIPLE CHOICE QUESTIONS Use the following information for questions 1-4: Seasons Construction is constructing an office building under contract for Cannon Company. The contract calls for progress billings and payments of $1,240,000 each quarter. The total contract price is $14,880,000 and Seasons estimates total costs of $14,200,000. Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2014. 1. At December 31, 2014, Seasons estimates that it is 30% complete with the construction, based on costs incurred. What is the total amount of Revenue from Long-Term Contracts recognized for 2014 and what is the balance in the Accounts Receivable account assuming Cannon Cafe has not…show more content…
Carperter Company has used the installment method of accounting since it began operations at the beginning of 2015. The following information pertains to its operations for 2015: Installment sales $ 2,800,000 Cost of installment sales 1,960,000 Collections of installment sales 1,120,000 General and administrative expenses 280,000 The amount to be reported on the December 31, 2015 balance sheet as Deferred Gross Profit should be A. $ 336,000. B. $ 504,000. C. $ 672,000. D. $1,680,000. Gross profit %=(2800000-1960000)/2800000=30% Deferred Gross profit (beginning balance): (2800000-1960000)=840000 Realized Gross profit in 2015: 1120000x30%=336000 Deferred Gross profit (ending balance)= 840000-336000=504000 Use the following information for questions 8-10. 8. During 2014, Vaughn Corporation sold merchandise costing $2,250,000 on an installment basis for $3,000,000. The cash receipts related to these sales were collected as follows: 2014, $1,200,000; 2015, $1,050,000; 2016, $750,000. What is the rate of gross profit on the installment sales made by Vaughn Corporation during 2014? A. 75% B. 60% C. 40% D. 25% (3000000-2250000)/3000000=25% 9. If expenses, other than the cost of the merchandise sold, related to the 2014 installment sales amounted to $135,000, by what amount would Vaughn’s net income for 2014 increase as a result of installment sales? A. $ 165,000 B. $ 266,250 C. $ 300,000 D. $1,065,000

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