Question :
61. When the seller has received cash, but has not earned : 1230642
61. When the seller has received cash, but has not earned all of the revenues represented by the cash by providing goods and services, the seller has incurred an obligation to provide goods or services. These liabilities A. are referred to as deferred performance obligationsB. may use an account title of Advances from CustomersC. may use an account title of Deferred RevenuesD. may use an account title of Unearned RevenuesE. all of the above
62. The cost recovery method A. matches the costs of generating revenue with cash receipts until the seller recovers all its costs.B. is a method by which the seller sets expenses equal to revenue in each period until it recovers all its costs.C. is a method by which the seller does not recognize gross margin in income until it has recovered all of the costs of the sale. D. is a method by which the seller reports revenue without any matching expenses in its income statement after cumulative cash receipts equal total costs, . E. all of the above
63. Firms extending credit to customers should A. strive for zero uncollectible accounts to eliminate the need for establishing a bad debt expense and maintaining an allowance for uncollectible accountsB. grant credit indiscriminately otherwise the firm may be charged with discrimination in the granting of credit and could be found to be in violation of Federal lawsC. grant credit to a given group of customers whenever the amount collected from the credit sales to that group exceeds the cost of goods sold and the other costs of serving that group D. should ignore collection efforts aimed at those customers who have not paid their bills because the cost of staffing and maintaining a collection department are never cost effectiveE. none of the above
64. For U.S. companies, how do U.S. GAAP and income tax reporting compare in their treatment of uncollectible accounts? A. U.S. GAAP and income tax reporting both require the direct write-off methodB. U.S. GAAP and income tax reporting both require the allowance methodC. U.S. GAAP and income tax reporting require different treatments of uncollectible accounts D. U.S. GAAP and income tax reporting assume uncollectible accounts are estimated based on past experience for reporting purposesE. none of the above
65. The direct write-off method A. recognizes losses from uncollectible accounts in the period when a firm decides that specific customers’ accounts are uncollectibleB. does not usually recognize the loss from uncollectible accounts in the period in which the sale occurs and the firm recognizes revenueC. provides firms with an opportunity to manage earnings each period by deciding when particular customers’ accounts become uncollectibleD. all of the above E. none of the above
66. The method that recognizes losses from uncollectible accounts in the period when a firm decides that specific customers’ accounts are uncollectible is called the A. direct write-off methodB. allowance methodC. percentage of sales methodD. bad debt determination methodE. indirect write-off method
67. Which of the following is not a shortcoming of the direct write-off method? A. It provides firms with an opportunity to manage earnings each period by deciding when particular customers’ accounts become uncollectibleB. It does not usually recognize the loss from uncollectible accounts in the period in which the sale occurs and the firm recognizes revenueC. The amount of accounts receivable on the balance sheet does not reflect the amount a firm expects to collect in cashD. It is the method required for income tax reporting in the United StatesE. none of the above
68. The direct write-off method A. must be used for income tax reporting in the United StatesB. is the method preferred by U.S. GAAP for financial reportingC. prevents management of earnings by the firmD. does not misstate the amount of accounts receivable on the balance sheetE. none of the above
69. An example of a firm’s use of a different set of accounting principles for financial reporting and for income tax reporting is A. the allowance method for financial reporting and the direct write-off method for income tax reportingB. the direct write-off method for financial reporting and the allowance method for income tax reportingC. the direct write-off method for financial reporting and the percentage of sales method for income tax reportingD. the allowance method for financial reporting and the percentage of payables method for income tax reportingE. none of the above
70. Rock Aerospace CompanyRock Aerospace Company signed a contract on April 1, Year 4, to build a satellite for $28,000,000. Estimated costs for the contract are:
Year 4
$ 5,600,000
Year 5
$11,200,000
Year 6
$ 5,600,000
Assume that actual costs incurred coincide with expectations. Cash collections of the contract price are as follows:
Year 4
$ 4,200,000
Year 5
$ 7,000,000
Year 6
$16,800,000
Refer to the Rock Aerospace Company example. Income from the contract for Year 5 under the percentage-of-completion method is: A. $1,000,000B. $1,400,000C. $2,800,000D. $3,360,000E. None of the above
