Review questions Exam 2 with answers
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 yet made its last quarterly payment?
Revenue Accounts Receivable
A. $4,960,000 $4,960,000
B. $4,260,000 $1,240,000
C. $4,464,000 $1,240,000
D. $4,260,000 $4,960,000
Total revenue: 14,880,000 x 30%=4464000; AR: the amount billed but not yet collected in the last quarter: 1240,000
2. At December 31, 2015, Seasons Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $14,400,000 due to unanticipated price increases. What is the total amount of Construction Expenses that Seasons will recognize for the year ended December 31, 2015?
A. $10,800,000
B. $6,300,000
C. $6,390,000
D. $6,540,000
Total cost incurred so far: 14,400,000* 75%=10800000
Cost incurred in 2014: 14,200,000*30%=4260000
Cost incurred in 2015: 10800000-4260000=6540000
3. At December 31, 2015, Seasons Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $14,400,000 due to unanticipated price increases. What is reported in the balance sheet at December 31, 2015 for Seasons as the difference between the Construction in Process and the Billings on Construction in Process accounts, and
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 yet made its last quarterly payment?
Revenue Accounts Receivable
A. $4,960,000 $4,960,000
B. $4,260,000 $1,240,000
C. $4,464,000 $1,240,000
D. $4,260,000 $4,960,000
Total revenue: 14,880,000 x 30%=4464000; AR: the amount billed but not yet collected in the last quarter: 1240,000
2. At December 31, 2015, Seasons Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $14,400,000 due to unanticipated price increases. What is the total amount of Construction Expenses that Seasons will recognize for the year ended December 31, 2015?
A. $10,800,000
B. $6,300,000
C. $6,390,000
D. $6,540,000
Total cost incurred so far: 14,400,000* 75%=10800000
Cost incurred in 2014: 14,200,000*30%=4260000
Cost incurred in 2015: 10800000-4260000=6540000
3. At December 31, 2015, Seasons Construction estimates that it is 75% complete with the building; however, the estimate of total costs to be incurred has risen to $14,400,000 due to unanticipated price increases. What is reported in the balance sheet at December 31, 2015 for Seasons as the difference between the Construction in Process and the Billings on Construction in Process accounts, and