Ch.6-Part B Flashcards
CC: Robertson Construction entered into a contract to construct a tunnel for a fixed price of $12,000,000. Robertson recognizes revenue over time according to percentage of completion. Here are some facts:
Estimated Additional
Cost incurred Cost of Complete
24’ $3,000,000. $6,000,000
25’ $5,000,000. $2,000,000
26’ $2,500,000. $0
How much revenue would Robertson recognize in 2024?
a. $4,000,000
b. $5,000,000
c. $6,000,000
d. $12,000,000
A
CC: Robertson Construction entered into a contract to construct a tunnel for a fixed price of $12,000,000. Robertson recognizes revenue over time according to percentage of completion. Here are some facts:
Estimated Additional
Cost incurred Cost of Complete
24’ $3,000,000. $6,000,000
25’ $5,000,000. $2,000,000
26’ $2,500,000. $0
How much revenue would Robertson recognize in 2025?
a. $5,000,000
b. $5,600,000
c. $8,000,000
d. $9,600,000
B
CC: Robertson Construction entered into a contract to construct a tunnel for a fixed price of $12,000,000. Robertson recognizes revenue over time according to percentage of completion. Here are some facts:
Estimated Additional
Cost incurred Cost of Complete
24’ $3,000,000. $6,000,000
25’ $5,000,000. $2,000,000
26’ $2,500,000. $0
How much revenue would Robertson recognize in 2026?
a. $0
b. $2,000,000
c. $2,400,000
d. $12,000,000
C
CC: How should the balances of progress billings and construction in process be shown at reporting dates prior to the completion of a long-term contract?
a. Progress billings as deferred income, construction in progress as a deferred expense.
b. Progress billings as income, construction in process as inventory.
c. Net balance, as a current asset if debit balance, and current liability if credit balance.
d. Net balance, as income from construction if credit balance, and loss from construction if debit balance.
C
CC: KoralGables Construction Co. began operations in 2024. Construction activity for 2024 is shown below. KoralGables recognizes revenue upon completion of the contract. Which of the following should be shown on the balance sheet at December 31, 2024?
Contract Price: 3,600,000
Billings in 2024: 1,200,000
Collections in 2024: 1,000,000
Cost in 2024: 800,000
Estimated Remaining Costs to Complete: 2,280,000
A. The contract liability, billings in excess of cost, of $200,000.
B. The contract liability, billings in excess of cost, of $400,000.
C. The contract asset, contract amount in excess of billings, of $200,000.
D. The contract asset, contract amount in excess of billings, of $400,000.
B
CC: In 2024, ToughBuilder began work on a two-year fixed price contract project. ToughBuilder recognizes revenue over time according to percentage of completion for this contract, and provides the following information (dollars in millions). What is the fixed contract price for ToughBuilder’s project? (ToughBuilder’s fiscal year end is 12/31)
Accounts receivable, 12/31/2024 (from construction progress billings): $50
Actual construction costs incurred in 2024: $135
Cash collected on project during 2024: $105
Gross profit recognized for 2024: $65
Estimated percentage of completion during 2024: 50%
a. $120 million.
b. $240 million.
c. $345 million.
d. $400 million.
D
CC:Robertson Construction entered into a contract to construct a tunnel for a fixed price of $12,000,000. Robertson recognizes revenue over time according to percentage of completion. Here are some facts:
Estimated Additional
Cost incurred Cost to complete
24’ $3,000,000. $6,000,000
25’ $500,000. $6,500,000
26’ $6,500,000. $0
How much gross profit would Robertson recognize in 2025?
a. $200,000
b. $(300,000)
c. $4,200,000
d. $4,200,000
C
CC: Alan Construction Corp. entered into a contract to install a solar system for a fixed price of $1,500,000. Alan Construction Corp. recognizes revenue upon contract completion.
Estimated Additional
Cost incurred Cost to complete
22’ $200,000. $1,400,000
23’ $900,000. $600,000
24’ $500,000.
In 2023, Alan Contruction Corp would report (rounded to the nearest thousand) gross profit (loss) of:
a. $(100,000)
b. $(200,000)
c. $(500,000)
d. $0
A
Which of the following is not true about revenue recognition with respect to long-term construction contracts?
a. Long-term construction contracts often are viewed as having a single performance obligation, because goods or services fail the “separately identifiable” criterion.
b. Long-term construction contracts often satisfy the criteria for recognizing revenue over time.
c. Long-term construction contracts require accounting for construction in progress as well as billings to customers.
d. Long-term construction contracts typically include multiple performance obligations because of all the different types of goods or services included for each project.
N/a
When accounting for a long-term construction contract for which revenue is recognized over time according to the percentage of completion, gross profit is recognized in any year and is debited to:
a. Construction in progress.
b. Billings on construction contract.
c. Accounts receivable.
d. Deferred income.
N/a
Which of the following is least likely to be a reason why a long-term construction contract would qualify for revenue recognition over time?
a. The customer consumes the benefit of the seller’s work as it is performer
b. The seller is creating an asset that has no alternative use to the seller, and the seller has the legal right to receive payment for progress to date.
c. The customer controls the asset as it is created.
d. The seller is constructing an addition to property that is owned by the
N/a
The Lao Construction Company recognizes revenue over time according to percentage of completion for its long-term construction contracts. In 2024, Lao began work on a construction contract. Information on this contract at the end of 2024 is as follows:
Cost incurred during the year: $1,500,000
Estimated additional cost to complete: $6,000,000
Gross profit recognized in 2024: $250,000
What is the contract price (total revenue) on this contract?
a. $8,750,000
b. $7,500,000
c. $9,000,000
d. $7,000,000
N/a
Arizona Desert Homes (ADH) constructed a new subdivision during 2023 and 2024 under contract with Cactus Development Company. Relevant data are summarized below:
Contract amount $2,910,000
Cost: 2023
2024
Gross profit: 2023
2024
Contract billings:
