Revenue Recognition

Question 1

% of Completed Contract method, when is there a def. tax liab:

Answer 1

If you are in Y2, only year two’s income will be recognized.
Therefore, in a 3-year contract, Year 2 has a deferred tax liability because
the income is not yet recognized at the amount it will be in Year 3.

Question 2

Amount of Gross Profit should be recognized in the last year of the contract?

Answer 2

1. Get % of Project completed
   =(cost incurred b4 the last year/Est cost of proj)
2. Apply % by original GP amount

=%(Cash Rec. for Proj- Est Cost)

Question 3

Donations or contributions are recognized as?

Answer 3

“Additions” to an account.

Question 4

If a County has levied 2,000,000, of which 1% is expected to be uncollectible, which amount should they recog. as Property Tax Revenue

Answer 4

2,000,000*.01= 20,000
Levied Amount x % uncollectables= Amount expect. to be uncollectable.

Levied Amount - Uncollectable Amount= Amount rec.

Question 5

The funded status of a defined benefit pension plan for a company should be reported in

Answer 5

C. The statement of financial position.
Funded status is the difference between projected benefit obligation and plan assets at fair value. Neither of these amounts is reported in the balance sheet (they appear in the notes only), but their difference is reported in the balance sheet as the reported pension liability for defined benefit plans. It is the amount the plan is “behind” in terms of having assets available for payment of benefits.