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Exam 5: Income Measurement

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Question 91

Multiple Choice

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In its December 31,2016,balance sheet,Lake would report:

A) Deferred gross profit of $700,000.
B) Deferred gross profit of $600,000.
C) Installment receivables (net) of $700,000.
D) Installment receivables (net) of $400,000.

E) B) and D)
F) B) and C)

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Question 92

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Use the following to answer questions Missoula Inc.reported the following selected financial statement data: -Required: Compute the average days in inventory for 2016.

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Question 93

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Which of the following is not an indicator that the constraint on recognizing variable consideration should be applied?

Use the following to answer questions The following partial income statement and balance sheet information (in $ millions)comes from the Annual Report of Saratoga Springs Co.for the year ending 12/31/2016: Required: Compute the following amounts for Saratoga Springs Co. -Its receivables turnover ratio for 2016.Round your answer to one decimal place.

Goods and services are capable of being distinct if:

Hans Cars & Trucks sells various types of used vehicles with a one-year warranty that covers any defects.When customers make a purchase,they also receive a coupon for 10 free engine oil changes and an option to change all of the tires for $50 after 30,000 miles.Typically,customers pay $25 for an oil change and $250 for a new set of tires. Required: (a)Given the information above,how many performance obligations exist in the contract to purchase a vehicle? (b)Assume the same contract but that it offers customers an option to change all of the tires for $250 after 30,000 miles.How many performance obligations exist in the contract to purchase a vehicle?

What are CCC's estimated remaining construction costs on the project at the end of 2016?

Prepare Terra's January journal entry to account for the revenue earned from January 1 - January 31.

The adjusted market assessment approach can be used to estimate the stand-alone selling price of a good or service.

Refer to the information in the previous question.Assume that the UFL anticipates that,in addition to receiving the $1 million license fee,it will receive a bonus of $2 million in year 1 of the contract and a bonus of $3 million in years 2-4 of the contract based on Tank-Skin's sales.Also assume that the UFL is convinced that it is probable there will not be a significant reversal of any revenue recognized with respect to the bonus in subsequent periods.At the inception of the contract,what is the amount of transaction price that the UFL would estimate with respect to this license arrangement?

Use the following to answer questions Sahara Desert Homes (SDH)reports under IFRS and constructed a new subdivision during 2015 and 2016 under contract with Cactus Development Co.Relevant data are summarized below: SDH uses the cost recovery method under IFRS to recognize revenue. -What is SDH's journal entry to record revenue in 2016?

Sellers are only required to adjust the transaction price to reflect the time value of money when the contract has a significant financing component.

Estimate the stand-alone selling price of the software using the adjusted market assessment approach.

What would be the journal entry made in 2015 to record revenue?

A decrease in the receivables turnover ratio indicates a decrease in the time between credit sales and cash collection.

On June 1^st,Joseph & Company received a $500 deposit for 80 cases of wine.On June 10^th the customer identified specific vintages that are included in Joseph's inventory,and asked that Joseph not ship the wine until June 20 so the customer could ready space to store the wine,so Joseph set those wines aside for the customer,boxed and ready for shipment to the customer.On June 20^th the wine was shipped and delivered to the customer.Joseph likely would recognize revenue on

After Sweeney has transferred a painting to a barbershop,the painting:

Which of the following is an example of an extended warranty?

If a licensee benefits from the seller's activity over the license period with respect to the licensed intellectual property,revenue should be recognized over time.

In February 2016,Omnibus Interior Corporation enters into a contract with Pike Realty to remodel a 6-unit luxury condominium in New York City.Under the contract,the company is entitled to receive a fixed fee of $1 million,and an additional performance bonus of $500,000 if the property is sold during the same year. Required: Given a strong demand for housing,Omnibus estimates that the property would most likely be sold within the same year,and bases estimates of variable consideration on the most likely estimate.On what transaction price should Omnibus base revenue recognition?