744 (Download PDF) Intermediate Accounting Volume 1 Canadian 7th Edition Beechy Test Bank Full Chapter

Intermediate Accounting Volume 1
Canadian 7th Edition Beechy Test Bank

Go to download the full and correct content document:
https://testbankfan.com/product/intermediate-accounting-volume-1-canadian-7th-editi
on-beechy-test-bank/
More products digital (pdf, epub, mobi) instant
download maybe you interests ...
Intermediate Accounting Volume 1 Canadian 7th Edition

Beechy Solutions Manual
https://testbankfan.com/product/intermediate-accounting-
volume-1-canadian-7th-edition-beechy-solutions-manual/
Intermediate Accounting Volume 1 7th Edition Beechy

Test Bank
volume-1-7th-edition-beechy-test-bank/

Test Bank

Beechy Test Bank
volume-2-canadian-7th-edition-beechy-test-bank/
Solutions Manual
volume-1-6th-edition-beechy-solutions-manual/

Solutions Manual

Beechy Solutions Manual
volume-2-canadian-7th-edition-beechy-solutions-manual/

Test Bank

Solutions Manual
Chapter 6
Student: ___________________________________________________________________________
1. Receipt of cash by the seller at the time of sale is not required for the recognition of revenue.
True False
2. In accounting, the term "revenue recognition" refers to measuring the expense related to the
revenue for a specific period.
True False
3. Generally, expenses incurred to generate revenues should be matched to the revenues

recognized in a given period.
True False
4. The percentage-of-completion method of accounting for long-term construction projects is

supported on the basis that it is more conservative than the completed contract method.
True False
5. Non-refundable deposits automatically meet the criteria for immediate revenue recognition.
True False
6. ASPE and IFRS will both follow a contract-based approach to revenue recognition in the future.
True False
7. The sale of a company's land would necessarily result in a gain or loss, and not a revenue or
expense.
True False
8. The earnings based and contract based approaches will both result in the same amount of
revenue being recognized over time.
True False
9. Revenues for certain commodities with a readily available market may be recognized at
production since uncertainties with respect to the sale are likely to be minimal.
True False
10. Collectability must be certain in order for revenue to be recognized.
True False
11. It may be argued that the earnings based approaches is more focused on the income statement
while the contract based approach focuses on the balance sheet.
True False
12. The percentage- of -completion method of accounting for long-term construction-type contracts is
preferable when estimates of costs to complete and extent of progress toward completion are
reasonably dependable.
True False
13. Revenues from peripheral transactions are considered gains, while those from a company's
principal line of business would be considered sales or revenues.
True False
14. When rent is received in advance the event that triggers revenue recognition is the passage of
time.
True False
15. An initial licensing fee that allows the holder to use the name of another company for a defined
period of time would be capitalized and subsequently amortized over the number of periods
benefitted.
True False
16. A furniture manufacturer receives a purchase order from a client for a customized wooden
cabinet. The cabinet will be delivered and paid for upon completion which is estimated to be in
three months from now. This event would trigger a journal entry on the manufacturer's books if
the earnings approach were used, but not if the contract approach were used.
True False
17. Warranty costs related to goods sold on instalment sales should not be accrued.
True False
18. The use of the contract based approach to revenue recognition is dependent on whether or not
the transaction with the client has commercial substance.
True False
19. Revenue should not be recognized if the buyer's obligation to pay the seller is contingent on the
resale of the product.
True False
20. The contract price must be known with certainty in order for the contract based approach to be
applied.
True False
21. There will be no impact on a company's net assets until revenue is recognized.
True False
22. In a consignment arrangement, the seller is essentially acting as an agent of the manufacturer of
the goods or their owner.
True False
23. The gross approach to recording revenues results in higher earnings than does the net method.
True False
24. Under a bill and hold arrangement, revenue recognition is delayed until the buyer takes
possession of the merchandise.
True False
25. "Billings on contracts" is a contra account to "Accounts Receivable."
True False
26. If a company receives a commission on products it sells but otherwise has no control over selling
prices, it is essentially acting as an agent on behalf of another company, and would likely record
revenue from these sales on a net basis.
True False
27. When goods are sold, the event which triggers revenue recognition is the delivery of the goods.
True False
28. Non-refundable payments can normally be recognized upon receipt, since there is no
performance obligation related to these payments.
True False
29. The percentage-of-completion and completed contract methods will produce different periodic
income amounts, but the Accounts Receivable balances will be equal.
True False
30. The value of the consideration received must be known or measurable with absolute certainty in
order for revenue to be recognized.
True False
31. When goods are sold, revenue may still be recognized if there is an insignificant degree of
continuing managerial involvement in some instances.
True False
32. The transaction price when non-monetary assets are involved in a sale is the value of the non-
cash consideration received.
True False
33. The percentage-of-completion method for long-term construction contracts can be used if at least
the ultimate collection of the contract price is reasonably certain.
True False
34. Using actual and estimated cost figures to estimate the degree of completion of a long-term
construction project is an example of an input-based approach to estimation.
True False
35. ABC Inc. uses the percentage of completion method to account for one of its long-term
construction projects. ABC reported a loss on this contract for its most recent fiscal year, but the
contract is expected to be profitable. This is an onerous contract.
True False
construction projects. Last year the company recorded revenue of $1 million during the first year
of one of its projects, which at the time was expected to be profitable. Nearly one year later, the
company has incurred substantial cost-overruns. The company now expects the contract to lose
$500,000. This is an onerous contract. ABC should therefore record a loss of $500,000 on this
contract for the current year.
True False
37. The amount of revenue recognized by a franchisor will usually depend on the franchise
agreement.
True False
38. When one company is acting as an agent on behalf of another company or individual, it will
normally report revenues on a net basis.
True False
39. Economic Value Added (EVA) is the difference between a product's input cost and final sales
price. This figure is dependent up on the firm's earnings process.
True False
40. A purchase order received from a client would trigger a journal entry under the earnings-based
revenue recognition approach, but not on the contract-based approach.
True False
41. As a general rule, the greater the uncertainty involved with respect to a sales transaction, the
longer one would delay revenue recognition.
True False
42. Under IFRS, sales contracts with multiple deliverables may be treated as though they were a
single element, for the sake of simplicity.
True False
43. Under IFRS, sales contracts with multiple deliverables should be split according to their relative
fair values if possible, and accounted for accordingly.
True False
44. Under IFRS, goods sold under Bill and Hold provisions must be on hand and ready for immediate
delivery if revenue is to be recognized.
True False
45. Biological assets are generally recognized at their net realizable values, with gains and losses
flowing through income.
True False
46. If a client presents an extreme credit risk, the seller would be more likely to use the Installment
Sales method to account for the transaction than the Cost Recovery Method.
True False
47. In the critical event that the revenue is not recognized at the time of the sale due to a return
privilege, the gross margin is to be recognized only after the return privilege has expired.
True False
48. The use of actual and expected costs to determine the percentage of completion on a long term
project is an example of an output method approach to evaluating contract progress.
True False
49. Under IFRS, interest revenue must be recognized using the effective interest method, and
dividend revenue must be recognized when the right to receive them has been established, and
there are no significant uncertainties.
True False
50. When a barter transaction has no commercial substance, a gain or loss must always be
recognized on the income statement as a result of the exchange.
True False
51. When goods are sold f.o.b. shipping point, the revenue earnings process is usually not
considered to be complete until the buyer has received the goods and inspected them.
True False
52. The earliest point at which all criteria for revenue recognition are met is known as a critical
event.
True False
53. When a grocery store sells groceries and receives payment in the form of a cheque, the revenue
principle would state that the revenue should not be recognized until the cheque clears the
bank.
True False
54. When a one year-lease-term is signed, the lessor earns revenue with the passage of time.
True False
55. Revenues must always be recognized at a single point in time.
True False
56. If sales are made on "FOB destination" terms, the revenue earning process is completed when
the products are removed from the seller's place of business by the common carrier.
True False
57. If fair values cannot be determined during a barter transaction, the book value method must be
used.
True False
58. Under the percentage-of-completion method of accounting for long-term construction contracts,
revenue is recognized only when the construction is completed.
True False
59. Under the percentage-of-completion method of accounting for long-term construction contracts,
revenue is recognized as construction progresses (usually on the basis of costs incurred) to attain
a matching of revenues and expenses.
True False
60. Under the completed contract method, all construction costs are accumulated in an inventory
account.
True False
61. Bearer plants are recorded at their fair value less costs to sell.
True False
62. Once biological assets become ready for sale, they effectively become inventory. Deemed cost in
this case is fair value of the items less their selling costs. Subsequently they are valued at their
fair value less costs to sell with gains and losses flowing to income.
True False
63. When cash is collected on account and the instalment sales method is used, the debit is to
instalment accounts receivable and the credit is to cash.
True False
64. The completed-contract method of revenue recognition recognizes revenue on a long-term

project as work progresses so that timely information is provided.
True False
65. Payment on account of progress billings, when using the percentage of completion method of
recognizing revenue are debited to cash and credited to progress billings.
True False
66. A long-term contract is automatically considered onerous if a loss is recognized in any given
year.
True False
67. If it becomes apparent that a long term project will result in a loss, the full amount of the loss must
be accounted for in the year it is first estimable.
True False
68. Most construction companies cannot afford to wait until the completion of the contract to collect
their billings.
True False
69. When using completed contract method of recognizing revenue, the billings to the customer are
debited to cash and credited to progress billings.
True False
70. Non-monetary transactions by definition involve no exchange of cash.
True False
71. Non-monetary transactions lacking commercial substance can never result in a gain or loss being
recorded.
True False
72. ABC Inc. sold a DVD player to a client on June 30th, Year 2 for $150. The DVD player, which
came with a 2-year warranty, was thought to be worth $100 if sold without the warranty.
As a result of this sale, how much sales/revenue would ABC Inc. take into income on its
December 31st, Year 2 income statement?
A. $100.00.
B. $112.50.
C. $125.00.
D. $150.00.
73. Which of the following would not be considered a multiple-deliverable arrangement?
A. A product sold with a manufacturer's warranty, where both the product and warranty have
separately identifiable revenue streams.
B. A product sold with a manufacturer's warranty which covers only product assurances, where
only the product has a separately identifiable revenue stream.
C. Customer Loyalty Programs.
D. Franchise Fees.
74. In a normal sale, generally the most uncertain factor in the revenue recognition process is:
A. The seller's fulfillment of its responsibility in the transaction

B. The measurability of the resource or item received by the seller
C. The realizability of the resource or item received by the seller
D. The relevance of the resource or item received by the seller
75. Which of the following is not required for the recognition of revenue?
A. Receipt of cash by the seller at the time of sale.

B. Seller must receive an item ultimately realizable in cash, noncash resources, or claims to cash.
C. The earnings process must be essentially complete.
D. The transaction must create a measurable financial statement element which fulfills the
definition of a revenue.
76. In accounting, the term "revenue recognition" refers to:
A. Measuring the expense related to the revenue for a specific period.

B. Identifying sources of revenue.
C. Identifying transactions that result in an inflow of cash from customers.
D. Identifying the period when the customer first indicates the need for a good or service.
E. Identifying transactions that should be recorded as revenue in the current reporting period.
77. The revenue principle states that revenue should be recognized only when a(n):
A. Exchange transaction involving goods and services has occurred and a cash down payment
has been received.
B. Exchange transaction involving goods or services has occurred and the earnings process is
essentially completed.
C. Sale or service transaction has occurred.
D. Completed earnings process can be projected.
78. In selecting an accounting method for a newly contracted long-term construction project, the
principle factor to be considered should be:
A. The terms of payment in the contract.

B. The kind of technical facilities used in construction.
C. How reliable would an estimate be of the progress toward contract completion?
D. The method usually used by the contractor to account for other long-term construction
contracts.
79. When work to be done and costs to be incurred on a long-term contract cannot be reliably
estimated, which of the following methods of revenue recognition is preferable?
A. Percentage-of-completion method
B. Completed contract method
C. Sales method
D. Instalment method
80. Which of the following statements regarding the percentage-of-completion and completed
contract methods of accounting for long-term construction contracts are true?
A. They recognize different amounts of income for the construction period.

B. They produce the same inventory carrying values during the construction period.
C. Neither requires losses to be recognized in the period of occurrence.
D. Under only the percentage of completion method is it possible to recognize a loss for the
period when an overall profit is expected on the contract.
81. Which of the following is not a difference between the percentage-of- completion and completed
contract methods of accounting for long-term construction contracts?
A. One requires estimates of completion during the construction period and the other does not.
B. One records income (loss) each period during the construction period and the other does not.
C. They report different inventory amounts during the construction period.
D. They cause different cash inflows during the construction period.

supported on the basis that it:
A. Understates cost of goods sold.

B. Better conforms to the cost principle.
C. Produces a realistic matching of expenses with revenues.
D. is more conservative than the completed contract method.
83. Choose the correct statement concerning the percentage-of-completion method of accounting for
a firm with only one current long-term construction contract in process (assume no loss is
projected):
A. The net current asset account (net of construction- in- process, and billings) exceeds that
same account under the completed contract method.
B. If the construction- in- process account exceeds the billings account, total costs to date must
exceed total billings to date.
C. If the construction- in- process account exceeds the billings account, total costs to date must
exceed total cash received on the contract to date.
D. It is possible to have both a net current asset account and a net current liability account in this
situation.
84. Which of the following is the most conservative (slowest to recognize) revenue recognition
method?
A. Cost recovery method

B. Instalment method of revenue recognition
C. Production method
D. Percentage of completion method
85. During the period of construction, financial information related to a long-term contract, which is
being accounted for using, the completed contract method will:
A. Appear only on the income statement during the period of construction.

B. Appear on both the income statement and balance sheet during the construction period.
C. Not appear on the financial statements.
D. Appear only on the balance sheet during the period of construction.
86. Why is construction-in-progress increased by the annual recognized profit on long-term

construction contracts?
A. Because the contract price has increased.

B. Because the cost of the project is reduced.
C. Because work has been done.
D. Because the project's value is increased above cost.
87. Choose the correct description of the net balance of costs in excess of billings on long-term
contracts. Assume only one current contract, and that contract price does not equal total
estimated contract cost at the end of the current year.
A. Under completed contract, the balance equals cost plus billings.

B. Under completed contract, the balance equals total estimated profit less billings.
C. Under percentage of completion, the balance equals cost to date less billings, if profit has
been recognized.
D. Under percentage of completion, the balance equals cost to date less billings, less total
projected loss.
88. The principle disadvantage of using the percentage-of-completion method of recognizing revenue
from long-term construction contracts is that it:
A. May require that inter-period tax allocation procedures be used.

B. is likely to assign a small amount of revenue to a period during which much revenue actually
was earned.
C. is unacceptable for tax purposes.
D. Gives results based upon estimates, which may be subject to considerable uncertainty.
89. The percentage-of-completion and completed contract methods of accounting for long-term
construction contracts will produce:
A. The same amount of income in the year of completion.

B. The same inventory carrying value each year during the construction period.
C. Equal balances each period in the Billings On Contracts account.
D. The same cost of construction (expense) each year for a project.
90. P-Dog Inc. has a loyalty points program which awards two customer loyalty points for every $100
of goods purchased. During the year, the company sold $200,000 of goods in the store and
awarded 4,000 points which can be redeemed and used towards future purchases. The stand-
alone selling price for the goods sold is $150,000. Based on past experience, P-Dog expects that
only 80% of the points will actually be redeemed. The stand-alone selling price of the points is
$1.50 per point. Based on the information provided, the amount of revenue that P-Dog will report
on its statement of comprehensive income for the year would be:
A. $200,000.
B. $150,000.
C. $154,800.
D. $193,798.
91. Under the completed contract method of income recognition on long-term construction contracts:
A. The balance in the "Construction-in-Progress" account is reported on the balance sheet as a

long-term asset until the date of completion.
B. The accumulated amount in the "Construction-in-Progress" account is essentially the amount
of cost of goods sold at completion date.
C. Income is accumulated in the "Construction-in-Progress" account.
D. "Construction-in-Progress" is reduced when billings are collected.
92. Under the percentage-of-completion method of income recognition on long-term construction

contracts:
A. No income amount is closed each period to income summary.

B. The ending inventory is the same as it would be if accounted for under the completed contract
method.
C. Income is accumulated in the "Construction-in-Progress" inventory account.
D. The percentage of completion in any year depends on the proportion of billings collected.
93. On April 30, Green Ltd. sold land with a book value of $600,000 to Brown Ltd. for its market value
of $800,000. Brown Ltd. gave Green Ltd. a 12 percent, $800,000 note secured only by the land.
At the date of sale, Brown Ltd. was in a very poor financial position and its continuation as a
going concern was very questionable. Green Ltd. should:
A. Record a $200,000 gain on the sale of land.

B. Fully reserve the note by creating an allowance contra account.
C. Use the cost recovery method of accounting.
D. Record the note at its discounted value.
94. Net instalment accounts receivable is $5,000. Assume the instalment method of revenue
recognition is used and a gross profit percentage of 20%. Therefore:
A. $5,000 at sales price has not been collected

B. $1,250 of gross profit has been recognized
C. $6,250 at sales price has not been collected
D. $6,250 of cost has not been collected
95. Revenue is recognized at the time of sale under the:
A. Cost recovery method.

B. Collection method.
C. Percentage-of-completion method.
D. Instalment method.
E. Sales method when goods are sold on credit.
96. Grocery stores recognize most of their revenue based on the:

B. Specific performance method.
C. Proportional performance method.
E. Sales method.
97. Which of the following bases of revenue recognition reflects the greatest degree of uncertainty
about future critical events?
A. Sales method applied to sales of a department store

B. Cost recovery method applied to a bond investment
C. Production method on cost-plus-fixed-fee contract
D. Percentage-of-completion method on construction contract
98. Revenue is recognized prior to the time of sale under the:
A. Specific performance method.

B. Completed contract method.
C. Instalment sales method.
D. Production method.
99. Which of the following methods of revenue recognition is appropriate for use by a real estate
broker whose sole activity is sale of realty on a commission basis?
A. Completed performance method

B. Specific performance method
C. Collection method
D. Proportional performance method
100.A corporation incurred $111,000 costs to extract a diamond. The diamond turned out to be
flawed, so the company decided to break it into small pieces and sell diamond chips. The
company was uncertain if the diamond chips would sell at all. The diamond chips did sell, and the
company had the following sales and accounts receivable balances over the five following years:
Accounts Receivable
Balance Sales
January 1, 2001 $0 $15,000 for 2001
January 1, 2002 10,500 30,000 for 2002
January 1, 2003 25,500 60,000 for 2003
January 1, 2004 40,500 24,000 for 2004
January 1, 2005 78,000 15,000 for 2005
The accountant recommended that the company use the cost recovery method of income
recognition. Using this method, the company will recognize revenue as follows:
2013 2014
1 $60,000 $60,000
2 24,000 24,000
30 0
4 6,000 0
5 Not determinable based on the data given
A. Choice 1
B. Choice 2
C. Choice 3
D. Choice 4
E. Choice 5
101.A corporation sold goods for $10 million during 2007. Of this amount, $6 million were in cash, and
$4 million was on account. However, the company collected $2 million of the sales on account
during 2007. In conformity with the revenue principle, the amount of revenue that should be
recognized in 2007 is:
A. $2 million
B. $4 million
C. $6 million
D. $8 million
E. $10 million
102.A construction company has contracted with a major university to build a new sports complex.
The contract calls for two sports arenas to be built in the next three years. The company will
receive $24,000,000 for the project and their engineers originally estimated a total cost to
construct the two arenas of $20,400,000. The two arenas are scheduled for completion in May of
2007. If an actual cost of $9,200,000 is expended in 2004, and the engineers estimate another
$12,800,000 is to be expended to complete construction, how much income is to be recognized
under the percentage-of-completion method in 2004?
A. $836,364
B. $1,163,636
C. $2,000,000
D. $3,600,000
103.A construction company uses the percentage-of-completion method of accounting. In 2007, the
company began work on a government contract which had a contract price of $4,000,000 and
estimated costs of $3,000,000. Additional data were as follows:
2007 2008
Costs incurred during the year $600,000 $2,550,000
Estimated costs to complete, as of 12/31/2007 2,400,000
Billing during the year 720,000 3,080,000
Collections during the year 500,000 3,100,000
The portion of the total contract income to be recognized during 2007 is:
A. $120,000
B. $200,000
C. $250,000
D. $1,000,000
104.A construction company uses the percentage-of-completion method for long-term construction
contracts. A particular job was begun in 2006 and completed 2008. During 2007, it appeared that
the project would cost 25 percent more than originally expected. Data at each year-end are given
below:
2006 2007 2008

End of year estimated cost remaining $200,000 $100,000 $-0-
Annual cost incurred 200,000 200,000 60,000
The contract price was $700,000. Assuming the company properly recorded income in 2006, how
much income should be recorded in 2007?
A. $10,000
B. $42,000
C. $160,000
D. $192,000
105.Under the percentage-of-completion method, a company has recognized $40,000 of profit

through to the beginning of the current year on a contract, and total estimated contract cost is
$500,000 at that time. The contract price is $800,000. What is the percent of completion at the
beginning of the current year?
A. 13.33%
B. 15.8%
C. 8%
D. Insufficient data
106.Given the following data, what is profit in 2007 under the percentage-of-completion method for a
project begun in 2006 with a contract price of $1,000?
2006 2007
Costs incurred this year $100 $200
Total estimated costs remaining at end of year 700 400
A. $104
B. $129
C. $86
D. $61
107.Given the following data, what is the balance in construction-in-process at the end of 2006 under
the percentage of completion method for a project begun in 2006 with a contract price of $1,100?
2006 2007
A. $100
B. $38
C. $138
D. $400
108.Under the percentage of completion method, $400 of profit has been recognized in prior years on
a project with a contract price of $5,000. Data available as follow:
Total cost incurred till date = $3,000

Estimated costs remaining at end of current year = $2,500
What profit or loss is recognized in the current year?
A. $900 loss
B. $400 loss
C. $500 loss
D. no profit or loss
109.A firm uses the instalment method of revenue recognition on an item with a cash selling price of
$1,000 and cost of $600. During the year of sale, the firm received $250 from the customer.
Therefore, the net instalment account receivable equals which of the following amounts at the
end of the year of sale?
A. $750
B. $450
C. $300
D. $400
110.A firm uses the instalment method of revenue recognition on an item with a cash selling price of
$1,000 and cost of $600. During the year of sale, the firm received $250 from the customer.
Thereafter, no more cash is received. The firm repossesses the item, worth $500 at that time.
The entry to record the repossession includes:
A. Loss $350
B. Loss $250
C. Gain $200
D. Gain $50
111.A corporation, which began business on January 1, 2006, appropriately uses the instalment sales
method of reporting for accounting purposes. The following data were available for the years
2006 and 2007:
2006 2007
Instalment sales $1,050 $1,260
Cost of instalment sales 840 945
General and administrative expenses 105 126
Cash collected on 2006 instalment sales 450 375
Cash collected on 2007 instalment sales 600
The balance in the deferred gross profit control account on December 2007 should be:
A. $159
B. $210
C. $315
D. $525
112.Given the following data for a firm which uses the percentage of completion method on long-term
construction contracts, determine the ending balance of the account which is the net of
Construction- in-Process, and Billings on Contracts, at the end of Year 1, the first year of this
project.
Costs incurred = $20,000

Billings = $26,000
Cash collected = $15,000
Estimated remaining cost to complete, as of 12-31-2001 = $30,000
Contract price = $60,000
A. Costs in excess of billings $5,000

B. Billings in excess of costs $2,000
C. Costs in excess of billings $14,000
D. Billings in excess of costs $667
113.The January 1, 2006 status of long-term construction project No. 6 follows. Assume the
completed contract method.
Costs incurred to date = $20,000

Estimated remaining cost to complete = $40,000
On December 31, 2006, the estimated remaining cost to complete was still $40,000, and $25,000
of cost had been incurred during 2006. What is the January 1, 2007 balance of Construction-in-
Process?
A. $30,000
B. $40,000
C. $45,000
D. $50,000
114.Which of the following would be used in the calculation of the income recognized in the third and
final year of a construction contract which is accounted for using the percentage-of-completion
method?
Contract Price Actual Total Costs Income Previously Recognized

1 Yes No Yes
2 No No Yes
3 Yes Yes No
4 Yes Yes Yes
A. Choice 1
B. Choice 2
C. Choice 3
D. Choice 4
115.The completed contract method of accounting for long-term construction-type contracts is

preferable when:
A. Estimates of costs to complete and extent of progress toward completion are reasonably
dependable.
B. The contracts are of a relatively long duration.
C. A contractor is involved in numerous projects.
D. Lack of dependable estimates or inherent hazards cause forecasts to be doubtful.
116.When progress billings are sent on a long-term contract, what type of account should be credited
under the completed contract method and percentage-of-completion method?
Completed contract Percentage-of-completion

1 Contra asset Revenue
2 Contra asset Contra asset
3 Revenue Revenue
4 Revenue Contra asset
A. Choice 1
B. Choice 2
C. Choice 3
D. Choice 4
117.The percentage-of-completion method of accounting for long-term construction-type contracts is
preferable when:
A. A contractor is involved in numerous projects.

B. The contracts are of a relatively short duration.
C. The collectability of progress billings from the customer is reasonably assured.
D. Estimates of costs to complete and extent of progress toward completion are reasonably
dependable.
118.A sale should NOT be recognized as revenue by the seller at the time of sale if:
A. payment was made by cheque.

B. the selling price is less than the normal selling price.
C. the buyer has a right to return the product and the amount of future returns cannot be
reasonably estimated.
D. the goods are sold on credit.
119.Company X has a machine with a book value of $10,000 and a fair value of $15,000. Company Y
has a machine with a book value of $16,000 and a fair value of $14,000. Company X and Y
exchange machines. In addition, Company X gives $1,000 to Company Y as a result of the
exchange. The transaction is deemed to have commercial substance and the fair value
measurement of the assets are equally reliable. Company X would record the machine acquired
from Company Y at:
A. $10,000.
B. $14,000.
C. $15,000.
D. $16,000.
120.Company X has a machine with a book value of $10,000 and a fair value of $15,000. Company Y
has a machine with a book value of $10,000 and a fair value of $9,000. Company X and Y
exchange machines. In addition, Company X gives $1,000 to Company Y as a result of the
exchange. The transaction is deemed to lack commercial substance. Assuming that the book
value method is used, Company X would record:
A. no gain or loss on this transaction.

B. a gain of $1,000 on this transaction.
C. a loss of $1,000 on this transaction.
D. a loss of $2,000 on this transaction.
121.When work to be done and costs to be incurred on a long-term contract can be estimated
dependably, which of the following methods of revenue recognition is preferable?
A. Instalment method.
B. Percentage-of-completion method.
C. Completed-contract method.
D. None of these answers are correct.
122.The criteria for recognition of revenue at completion of production of precious metals and farm
products include:
A. an established market with quoted prices.

B. low additional costs of completion and selling.
C. units of production are interchangeable.
D. All of these answers are correct.
123.The method most commonly used to report defaults and repossessions is:
A. provide no basis for the repossessed asset, thereby recognizing a loss.

B. record the repossessed merchandise at fair value, recording a gain or loss if appropriate.
C. record the repossessed merchandise at book value, recording no gain or loss.
124.A construction company uses the percentage-of-completion method of accounting. In 2007, the
company began work on a government contract, which had a contract price of $4,000,000 and
estimated costs of $3,000,000. Additional data were as follows:
2007 2008
Costs incurred this year $600,000 $2,550,000
Estimated cost to complete as of 12/31/2007 2,400,000 -0-
Billings during the year 720,000 3,080,000
Calculate the gross profit to be recognized during 2007.
125.A construction company has consistently used the percentage-of-completion method of

recognizing income. In 2007, the company started work on a $6,000,000 construction contract,
which was completed in 2008. The accounting records disclosed the following data:
2007 2008
Progress billings $3,800,000 $2,200,000
Estimated cost to complete as of 12/31 3,600,000 1,800,000
Billings to the government during the year 4,600,000 1,400,000
Cash collected during the year 3,600,000
Calculate the amount of income that should have been recognized in 2007.
126.Under contract, ABC Corporation delivers 500 units to Customer A for $200 each on 1 March.
ABC's documented policy is to allow a customer to return any unused product within 30 days and
receive a full refund. The cost of each product is $150. Based on historical experience, ABC
estimates that 2% of the units will be returned. ABC expects that the returned products can be
resold. On March 15th, the customer returned 8 units to ABC. No other returns were received
during the month.
Required:
Record all of ABC Inc' journal entries for the month.
127.Under contract, ABC Corporation delivers 500 units to Customer A for $200 each on 1 March.
ABC's documented policy is to allow a customer to return any unused product within 30 days and
receive a full refund. The cost of each product is $150. ABC expects that the returned products
can be resold. On March 15th, the customer returned 8 units to ABC. No other returns were
received during the month.
Required:
Record all of ABC Inc' journal entries for the month, assuming that ABC cannot reasonably
estimate the amount of returns on March 15th.
128.Given the following data, calculate profit recognized in 2007 under the percentage of completion
method for a project begun in 2007 with a contract price of $1,000?
2007 2008
129.On January 1, 2016, XYZ Inc. delivers a machine to a buyer. The agreed-upon price is $9,000.
Included in this price is a twenty-four-month service contract, which stipulates that the system will
be fixed or replaced if it does not perform to certain specifications and 20 hours of service to
maintain the system over this period. The stand-alone price for the maintenance service is
$2,000. The buyer also opted for the twenty-four-month warranty, which XYZ sells separately for
$1,000. The company also estimates that based on past experience, the warranty costs for
defective machinery should be estimated at $450 per year. During Year 1, 8 hours of service are
performed, as expected, at a cost of $800, and warranty work resulted in expenditures of $300.
Required:
Using the above information, provide the journal entries required for 2016, assuming that XYZ
uses the revenue deferral approach to account for its warranties.
130.On January 1, 2016, XYZ Inc. delivers a machine to a buyer. The agreed-upon price is $9,000.
Included in this price is a twenty-four-month service contract, which stipulates that the system will
be fixed or replaced if it does not perform to certain specifications and 20 hours of service to
maintain the system over this period. The stand-alone price for the maintenance service is
defective machinery should be estimated at $450 per year. During Year 1, 8 hours of service are
performed, as expected, at a cost of $800, and warranty work resulted in expenditures of $300.
Required:
uses the cost deferral approach to account for its warranties.
131.Given the following data, calculate profit recognized in 2008 under the percentage of completion
method for a project begun in 2008 with a contract price of $1,000?
2007 2008
132.A company began work on a government contract at the start of 2007. The contract was to
construct a special building for $4,000,000. In making the bid, construction costs were estimated
to be $3,000,000. Data during the construction period was:
2007 2008
Estimated cost to complete as of 12/31 2,400,000 -0-
Billings to the government during the year 720,000 3,280,000
Cash collected during the year 500,000 3,500,000
How much income on the contract would be reported for each year assuming:
(a) Completed contract method?

2007: $______________ 2008: $_______________.
(b) Percentage-of-completion method? (basis: estimated costs to complete)
2007: $________________ 2008: $_______________.
133.A company entered into a contract to construct a building for a fee of $50,000. Construction
began in 2006 and was completed in 2008. Transactions related to the contract are summarized
below:
2006 2007 2008

Construction costs incurred to date $8,000 $16,600 $15,900
Estimated costs to complete 32,000 16,400 -0-
Billings and collections during year 7,500 20,000 22,500
Compute the income that should be recognized each year using (a) the percentage-of-
completion method and (b) the completed contract method.
[2006 | 2007 | 2008]

(a) $____________ $_______________ $______________
(b) $____________ $_______________ $______________
134.A construction company entered into a three-year contract to erect a building for a customer. Its
original bid on the job was for $3,600,000 but this was revised upward in year 3 to $3,900,000
because the customer negotiated for some "extras" (modification in the original specifications). A
cumulative history of costs incurred and cost expectations throughout the three years the
contract was in progress is set out below. Give the income to be reported (a) using the
percentage-of-completion method, and (b) using the completed contract method.
Year 1 Year 2 Year 3

Expected revenues $3,600,000 $3,600,000 $3,900,000
Actual costs (cumulative) 750,000 2,550,000 3,270,000
Expected future costs 2,250,000 525,000 -0-
(a) Income using percentage-of-completion

(b) Income using completed contract
135.A shipyard contracted with a foreign government to build a small naval vessel. The contract calls
for the foreign government to pay the shipyard $10,000,000 upon the completion and delivery of
the vessel in 2008. The shipyard engineers estimated the costs to complete the vessel at
$8,200,000. Under each of the situations that follow, show the income that would have to be
reported assuming the percentage-of-completion method is used to recognize income. Show
your computations.
a. Income to be reported in 2006, assuming $2,000,000 has been spent and the engineers
estimate an additional $6,800,000 will be spent to complete the vessel. 2001 income that should
be reported is (pick one below):
$280,000
$272,727
$1,200,000
Computations:
b. Income to be reported in 2007, assuming $6,000,000 has already been spent and the
engineers estimate an additional $3,4000,000 will be spent to complete the vessel. 2007 income
is (pick one below):
$110,252
$382,978
$548,936
Computations:
c. Income to be reported in 2008, assuming $8,800,000 has already been spent to complete and
deliver the vessel to the foreign government, which immediately paid their bill. 2008 income is
(pick one below):
$961,022
$777,332
$600,000
$1,200,000
$817,021
Computations:
136.The following data are available from a company for a long-term construction contract:
2006 2007 2008

Construction costs incurred to date $400,000 $1,600,000 $1,900,000
Estimated costs to completion 1,400,000 450,000
The contract price for the three-year contract was $2,100,000 and the estimated cost at the
beginning of the contract was $1,800,000.
(a) What is the amount of income that will be reported under the percentage-of-completion
method in 2006?
$
(b) What is the amount of income that will be reported under the percentage-of-completion
contract method for 2007?
$
(c) What is the amount of income that will be reported under the percentage-of-completion
$
137.The records of a construction company provided the following data on along-term construction
contract (3 years), which was just completed.
Construction contract price. $1,425,000
Estimated total cost (at start). $1,200,000
At end of 2001 At end of 2002 At end of 2003

Costs incurred to date:
(cumulative) $300,000 $480,000 $1,245,000
Estimated cost to complete 900,000 750,000 Completed
Progress billings to date:
(cumulative) 240,000 465,000 1,425,000
Progress collections to date:
(cumulative) 210,000 450,000 1,425,000
Complete the following partial financial statements for each year (assume percentage-of-
completion is based on costs incurred to total costs) (Hint: complete CC for all years, then
complete PC)*:
2001 2002 2003

CC PC CC PC CC PC
Income Statement Income on construction $ ___ $ ___ $ ___ $ ___ $ ___ $ ___
Balance Sheet Accounts receivable ___ ___ ___ ___ ___ ___
Inventory Construction in process ___ ___ ___ ___ ___ ___
Less ___ ___ ___ ___ ___ ___
Costs in excess of billings ___ ___ ___ ___ ___ ___
*CC = Completed contract; PC = Percentage of completion.

138.On January 1, 2007, a contractor started a construction project for $1,350,000; estimated
construction costs (total) were $1,050,000. Data for the two-year period:
2007 2008
Actual construction costs during the year $600,000 $465,000
Estimated remaining costs to complete the contract 450,000 -0-
Actual amount billed to the customer during the year 540,000 810,000
Actual cash collected from the customer during the year 525,000 825,000
Based upon the above data, provide the following amounts for each method:
Completed Contract Percentage-of-Completion

2007 2008 2007 2008
(a) Income on construction $ $ $ $
(b) Construction in progress $ $ $ $
(c) Costs in excess of billings $ $ $ $
139.A construction company signed a contract to build a plant for a customer. Construction covered a
four-year period. Data concerning the construction were as follows:

Estimated costs = $600,000
Actual results:
Actual costs Billings

Year 1*. $120,000 $100,000
Year 2*. 100,000 110,000
Year 3*. 240,000 240,000
Year 4*. 160,000 330,000
*No change in estimated costs.

Using the information above, answer the following questions:
(a) How much income will be reported in Years 1, 2, 3, and 4 if the completed contract method is
used?
Year 1: $
Year 2: $
Year 3: $
Year 4: $
(b) How much income will be reported each year if the percentage-of-completion method is
used?
Year 1: $
Year 2: $
Year 3: $
Year 4: $
(c) What net amount would be reported on the balance sheet for contracts in process at the end
of year 1 if the completed contract method is used?
$
(d) What net amount would be reported on the balance sheet for contracts in process at the end
of year 1 if the percentage-of-completion method is used?
$
140.On June 15, 2007, AB Construction Company signed a $180,000 contract to build a small
structure for XY Company. AB estimated that total cost to construct would be $160,000.
Construction started immediately because the required completion date was August 31, 2008.
AB's relevant data relating to this construction project were as follows:
2007 2008 Total

Contract price $180,000
Actual cost incurred by year $60,000 $102,000
Estimated costs to complete 100,000 -0-
Progress billings (to XY) by year 56,000 124,000
Collections (XY) cash by year 55,000 125,000
Required:
1. How much income should AB recognize each year, assuming:
Method Used For 2007 For 2008

(a) Completed contract $ $
(b) Percentage-of-completion $ $
2. What amounts should AB report on the balance sheet at the end of each year for:
(a) Accounts (billings) receivable assuming: 12/31/2007 12/31/2008

Completed contract method $ $
Percentage-of-completion method $ $
(b) Construction in process, assuming: 12/31/2007 12/31/2008
Percentage completion method $ $
3. Give the entry to record income for 2007, assuming the percentage-of-completion method is
used.
141.On January 1, 2007, a corporation signed a contract to build a specially designed plant; the
relevant data were (in 000's):

Estimated total construction cost = $10,500
Data during construction period (January, 1, 2007-December 31, 2008):
12/31/2007 12/31/2008
Actual cost to date (cumulative) $2,160 $10,875
Actual progress billings to date (cumulative) 2,100 13,500
Actual collections to date (cumulative) 2,055 13,500
Estimated remaining cost to complete 8,640 -0-
Required:
(1) Give the following amounts that should be reported on the income statement and balance
sheet:
Item Completed Contract Percentage-of-Completion

2007 2008 2007 2008
(a) Income from construction
(b) Accounts receivable
(c) Invoice construction (net asset)
(2) Give the entry to record 2007 construction income at December 31, 2008, for the percentage-
of-completion method.
142.A large construction firm, which uses the percentage of completion method, provided the
following information concerning one of its contracts (contract price, $1,000).

Cost incurred in year $200 $300 $250
Remaining cost to complete at end of year
Refer to the following two questions. The answer to question (b) depends on the answer to (a).
(a) What is the balance in construction in process at the end of year 1?

(b) Assume that $600 is the estimated remaining cost at the end of year 2. Provide the entry to
record revenue for year 2. Explain the ending balance in construction in process.
143.A company sold goods for $100,000 during 2007. Of this amount, $60,000 was cash and $40,000
was on account. The company collected $20,000 of the sales on account during 2001. In
conformity with the revenue principle, the amount of revenue that should be recognized in 2007
is ___________________.
144.A company incurred the following costs and received the following collections from customers
Costs Collections
2001 $120,000 -0-
2002 20,000 $80,000
2003 20,000 40,000
2004 10,000 100,000
2005 -0- 8,000
(a) If the company used the cost recovery method of revenue recognition, the income that should
be recognized in 2003 is ___________________.
(b) If the cost recovery method continues to be used through 2004, the amount of 2004 income
that should be recognized is ____________________.
145.The following data relates to a firm, which grants a liberal right of return to its customers:
Total credit sales for the year $100,000

Gross profit percentage 40%
Collections on account $60,000
Actual returns during the year $20,000
Accounts receivable for which the return privilege has yet to expire as of the year-end $5,000
The firm is unable to estimate returns
Required:
(a) The summary entries to account for sales-related transactions during the year, and any
adjusting entries (assume a perpetual inventory system).
(b) The relevant ending balance sheet accounts, and the income statement.
(c) The entry during the following year assuming the $5,000 of goods is returned before the
return privilege expired.
(d) The entry during the following year assuming the return privilege expired on the $5,000 of
accounts receivable.
146.The following data relates to a firm, which grants a liberal right of return to its customers:

The firm anticipates a 30% total sales return rate and all other criteria are met.
Required:
(c) The entry during the following year assuming that $10,000 of goods is returned before the
(d) The entry during the following year assuming that only $8,000 of goods are returned before
the return privilege expired.
147.A firm sold merchandise costing $600 for $1,000 on January 1, 2001. The selling firm accepted a
note with terms calling for two equal annual payments (which include 10% interest, and principal)
beginning December 31, 2001. There is sufficient uncertainty about the realizability of the two
payments to warrant the instalment method of revenue recognition.
Required:
assuming the 2 payments were received as expected, provide the entries to account for the sale
and cash collections (assume a perpetual inventory system).
148.The following information relates to the sale of an item of merchandise:
Selling price = $100

Cost = $70
Cash collected on sale to date = $40
For each of the independent revenue recognition situations below, determine the net balance in
accounts receivable given the above information, and provide an interpretation of each.
(1) The right of return on the sale has not expired; all criteria of CICA Handbook Sec. 3400 are
met and this item is not expected to be returned.
(2) The right of return on the sale has not expired; not all criteria of CICA Handbook, Sec. 3400
are met.
(3) The instalment method of revenue recognition is used to account for the sale.
(4) The cost recovery method of revenue recognition is used to account for the sale.
(5) Answer (4) assuming $80 cash has been collected to date.
149.A firm using the instalment method of revenue recognition repossessed an item it sold for
$40,000 (cost $24,000) after the customer stopped remitting cash. Only $26,000 was paid by the
customer to the date of repossession at which time the item is worth only $8,000.
(1) Determine the accounting gain or loss on repossession.

(2) Determine the economic gain or loss-the change in the value of the firm-as a result of the sale
and repossession.
(3) Reconcile total accounting earnings with the value you computed in (2).
150.Under the percentage of completion method, a company has recognized $40,000 of profit
$500,000 at that time. The contract price is $800,000. Calculate the percent of completion at the
beginning of the current year.
151.Given the following data for a firm which uses the percentage of completion method on long-term
construction contracts, determine the ending balance of the account which is the net of
Construction in Process, and Billings on Contracts, at the end of Year 1, the first year of this
project.
Costs incurred $20,000

Billings 26,000
Cash collected 15,000
Estimated remaining cost to complete, as of 12-31-2001 30,000
Contract price 60,000
152.In 2005, Tamarack Corporation began construction work under a three-year contract. The
contract price is $1,200,000. Evian uses the percentage of completion method for financial
accounting purposes. The income to be recognized each year is based on the proportion of cost
incurred to total estimated costs for completing the contract. The financial statement
presentations relating to this contract at December 31, 2005, follow:
Balance Sheet:
Contract billings $50,000
Construction in progress $150,000
Less contract billings 120,000
Cost of uncompleted contract in excess of billings $30,000
Income Statement:
Income (before tax) on the contract recognized in 2005 $30,000
Accounts receivable construction
Calculate how much cash was collected in 2005 on this contract.

153.Minty Inc. began work in 2006 on contract #3814, which provided for a contract price of
$4,500,000. Other details follow:
2006 2007
Estimated costs to complete as of December 31 2,400,000 0
Assume that Blaze uses the percentage-of-completion method of accounting, calculate the
portion of the total gross profit to be recognized as income in 2006.
154.Grandon Ltd. began work in 2006 on a contract for $5,400,000. Other data are:
2006 2007
Costs to date $1,800,000 $4,300,000
Estimated costs to complete 2,700,000
Billings to date 2,000,000 5,400,000
Collections to date 1,600,000 4,600,000
Assuming Grandon uses the percentage-of-completion method, calculate the gross profit to be
recognized in 2006.
155.Grandon Ltd. began work in 2007 on a contract for $5,400,000. Other data are:
2006 2007
Costs to date $1,800,000 $4,300,000
Billings to date 2,000,000 5,400,000
Assuming Grandon uses the completed contract method, calculate the gross profit to be
recognized in 2008.
156.The January 1, 2006 status of long-term construction project No. 6 follows. Assume the

On December 31, 2006, the estimated remaining cost to complete was still $40,000, and $25,000
of cost had been incurred during 2006. Calculate the January 1, 2007 balance of Construction in
Process.
157.Company A exchanges machinery with Company B. In addition, Company A gave $10,000 to
Company B as part of the exchange.
Company A's equipment had a book value of $20,000 and a fair value of $8,000.
Company B's equipment had a book value of $25,000 and a fair value of $15,000.
Provide the entry on Company A's books assuming that"
i) The transaction has commercial substance.

ii) The transaction has no commercial substance (use the book value method).
Chapter 6 Key
1. Receipt of cash by the seller at the time of sale is not required for the recognition of revenue.
TRUE
Accessibility: Keyboard Navigation
Beechy - Chapter 06 #1
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-02 Apply the revenue recognition criteria to various types of revenue earned by the transfer of goods and services at a single
point in time.
Topic: 06-18 Recognition at Delivery
2. In accounting, the term "revenue recognition" refers to measuring the expense related to the
revenue for a specific period.
FALSE
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Understand the revenue recognition process and criteria.
Topic: 06-01 Definitions
3. Generally, expenses incurred to generate revenues should be matched to the revenues

recognized in a given period.
TRUE
Blooms: Remember
Difficulty: 1 Easy

supported on the basis that it is more conservative than the completed contract method.
FALSE
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-04 Understand how revenue earned from long term contracts is measured, recognized and reported.
Topic: 06-44 Recording
5. Non-refundable deposits automatically meet the criteria for immediate revenue recognition.
FALSE
Blooms: Remember
Difficulty: 1 Easy
point in time.
Topic: 06-25 Example - Returns Not Predictable
6. ASPE and IFRS will both follow a contract-based approach to revenue recognition in the
future.
FALSE
Blooms: Remember
Difficulty: 1 Easy
Topic: 06-07 General Revenue Recognition Principle
7. The sale of a company's land would necessarily result in a gain or loss, and not a revenue or
expense.
FALSE
Blooms: Remember
Difficulty: 1 Easy
8. The earnings based and contract based approaches will both result in the same amount of
revenue being recognized over time.
TRUE
Blooms: Remember
Difficulty: 1 Easy
9. Revenues for certain commodities with a readily available market may be recognized at
production since uncertainties with respect to the sale are likely to be minimal.
TRUE
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-06 Understand and account for agricultural produce and biological assets.
Topic: 06-66 Agricultural Produce and Biological Assets
Topic: 06-71 Biological Assets Not Immediately Saleable
10. Collectability must be certain in order for revenue to be recognized.
TRUE
Blooms: Remember
Difficulty: 1 Easy
Topic: 06-13 Collectability
11. It may be argued that the earnings based approaches is more focused on the income
statement while the contract based approach focuses on the balance sheet.
TRUE
Blooms: Remember
Difficulty: 1 Easy
Topic: 06-08 The Earnings-Based Approach
12. The percentage- of -completion method of accounting for long-term construction-type

contracts is preferable when estimates of costs to complete and extent of progress toward
completion are reasonably dependable.
TRUE
Blooms: Remember
Difficulty: 1 Easy
Topic: 06-47 Extent of Estimates
13. Revenues from peripheral transactions are considered gains, while those from a company's
principal line of business would be considered sales or revenues.
TRUE
Blooms: Remember
Difficulty: 1 Easy
Topic: 06-03 Gains and Losses versus Revenue and Expense
14. When rent is received in advance the event that triggers revenue recognition is the passage of
time.
TRUE
Blooms: Remember
Difficulty: 2 Medium
Topic: 06-42 Measured over time
15. An initial licensing fee that allows the holder to use the name of another company for a defined
period of time would be capitalized and subsequently amortized over the number of periods
benefitted.
TRUE
Blooms: Remember
Difficulty: 1 Easy
Topic: 06-50 Licensing Fees
16. A furniture manufacturer receives a purchase order from a client for a customized wooden
cabinet. The cabinet will be delivered and paid for upon completion which is estimated to be in
three months from now. This event would trigger a journal entry on the manufacturer's books if
the earnings approach were used, but not if the contract approach were used.
FALSE
Blooms: Remember
Topic: 06-09 The Contract-Based Approach
17. Warranty costs related to goods sold on instalment sales should not be accrued.
FALSE
Blooms: Remember
Topic: 06-48 Long-Term Contract - Recognized at a Single Point in Time
18. The use of the contract based approach to revenue recognition is dependent on whether or
not the transaction with the client has commercial substance.
TRUE
Blooms: Remember
Difficulty: 1 Easy
Topic: 06-12 Contract-Based Revenue Recognition Requirements
19. Revenue should not be recognized if the buyer's obligation to pay the seller is contingent on
the resale of the product.
TRUE
Blooms: Remember
20. The contract price must be known with certainty in order for the contract based approach to be
applied.
TRUE
Blooms: Remember
Difficulty: 1 Easy
21. There will be no impact on a company's net assets until revenue is recognized.
TRUE
Blooms: Remember
Difficulty: 1 Easy
22. In a consignment arrangement, the seller is essentially acting as an agent of the manufacturer
of the goods or their owner.
TRUE
Blooms: Remember
Difficulty: 1 Easy
point in time.
Topic: 06-34 Consignment Arrangements
23. The gross approach to recording revenues results in higher earnings than does the net
method.
FALSE
Blooms: Remember
Difficulty: 1 Easy
Topic: 06-53 Gross or Net Revenue?
24. Under a bill and hold arrangement, revenue recognition is delayed until the buyer takes
possession of the merchandise.
FALSE
Blooms: Remember
Difficulty: 1 Easy
point in time.
Topic: 06-33 Bill-and-Hold Arrangements
25. "Billings on contracts" is a contra account to "Accounts Receivable."
FALSE
Blooms: Remember
Topic: 06-49 Contractor Control of the Asset
26. If a company receives a commission on products it sells but otherwise has no control over
selling prices, it is essentially acting as an agent on behalf of another company, and would
likely record revenue from these sales on a net basis.
TRUE
Blooms: Remember
Difficulty: 1 Easy
point in time.
27. When goods are sold, the event which triggers revenue recognition is the delivery of the
goods.
FALSE
Blooms: Remember
point in time.
28. Non-refundable payments can normally be recognized upon receipt, since there is no
performance obligation related to these payments.
FALSE
Blooms: Remember
Difficulty: 1 Easy
Topic: 06-55 Non-refundable payments
29. The percentage-of-completion and completed contract methods will produce different periodic
income amounts, but the Accounts Receivable balances will be equal.
TRUE
Blooms: Remember
Learning Objective: 06-03 Apply the revenue recognition criteria to various types of revenue earned by the transfer of goods and services over time.
Topic: 06-39 Estimating Costs
Topic: 06-40 Measurement not possible
30. The value of the consideration received must be known or measurable with absolute certainty
in order for revenue to be recognized.
FALSE
Blooms: Remember
Difficulty: 1 Easy
point in time.
Topic: 06-29 Five Steps
31. When goods are sold, revenue may still be recognized if there is an insignificant degree of
continuing managerial involvement in some instances.
TRUE
Blooms: Remember
Topic: 06-38 Input versus Output Methods
32. The transaction price when non-monetary assets are involved in a sale is the value of the non-
cash consideration received.
TRUE
Blooms: Remember
Difficulty: 1 Easy
Topic: 06-57 Non-cash consideration
33. The percentage-of-completion method for long-term construction contracts can be used if at
least the ultimate collection of the contract price is reasonably certain.
FALSE
Blooms: Remember
34. Using actual and estimated cost figures to estimate the degree of completion of a long-term
construction project is an example of an input-based approach to estimation.
TRUE
Blooms: Remember
Difficulty: 1 Easy
Topic: 06-37 Measuring Progress Over Time
construction projects. ABC reported a loss on this contract for its most recent fiscal year, but
the contract is expected to be profitable. This is an onerous contract.
FALSE
Blooms: Remember
Difficulty: 1 Easy
Topic: 06-46 Estimating Revenue
construction projects. Last year the company recorded revenue of $1 million during the first
year of one of its projects, which at the time was expected to be profitable. Nearly one year
later, the company has incurred substantial cost-overruns. The company now expects the
contract to lose $500,000. This is an onerous contract. ABC should therefore record a loss of
$500,000 on this contract for the current year.
FALSE
Blooms: Remember
Difficulty: 1 Easy
37. The amount of revenue recognized by a franchisor will usually depend on the franchise
agreement.
TRUE
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-05 Understand the revenue recognition for contracts involving multiple goods and services.
Topic: 06-62 Franchise Fees
38. When one company is acting as an agent on behalf of another company or individual, it will
normally report revenues on a net basis.
TRUE
Blooms: Remember
point in time.
39. Economic Value Added (EVA) is the difference between a product's input cost and final sales
price. This figure is dependent up on the firm's earnings process.
TRUE
Blooms: Remember
Topic: 06-06 Economic Value Added
40. A purchase order received from a client would trigger a journal entry under the earnings-based
revenue recognition approach, but not on the contract-based approach.
TRUE
Blooms: Remember
41. As a general rule, the greater the uncertainty involved with respect to a sales transaction, the
longer one would delay revenue recognition.
TRUE
Blooms: Remember
point in time.
Topic: 06-23 Five Steps
42. Under IFRS, sales contracts with multiple deliverables may be treated as though they were a
single element, for the sake of simplicity.
FALSE
Blooms: Remember
Topic: 06-58 Multiple Goods and Service Contracts
43. Under IFRS, sales contracts with multiple deliverables should be split according to their
relative fair values if possible, and accounted for accordingly.
TRUE
Blooms: Remember
44. Under IFRS, goods sold under Bill and Hold provisions must be on hand and ready for
immediate delivery if revenue is to be recognized.
TRUE
Blooms: Remember
point in time.
45. Biological assets are generally recognized at their net realizable values, with gains and losses
flowing through income.
TRUE
Blooms: Remember
Topic: 06-71 Biological Assets Not Immediately Saleable
46. If a client presents an extreme credit risk, the seller would be more likely to use the Installment
Sales method to account for the transaction than the Cost Recovery Method.
FALSE
Blooms: Remember
47. In the critical event that the revenue is not recognized at the time of the sale due to a return
privilege, the gross margin is to be recognized only after the return privilege has expired.
TRUE
Blooms: Remember
point in time.
Topic: 06-25 Example - Returns Not Predictable
Topic: 06-27 Summary
48. The use of actual and expected costs to determine the percentage of completion on a long
term project is an example of an output method approach to evaluating contract progress.
FALSE
Blooms: Remember
Topic: 06-41 Long-Term Contracts Measured Over Time
49. Under IFRS, interest revenue must be recognized using the effective interest method, and
dividend revenue must be recognized when the right to receive them has been established,
and there are no significant uncertainties.
TRUE
Blooms: Remember
Topic: 06-02 Revenue and Expense
Topic: 06-04 Presentation
50. When a barter transaction has no commercial substance, a gain or loss must always be
recognized on the income statement as a result of the exchange.
FALSE
Blooms: Remember
Learning Objective: 06-07 Understand the measurement and recognition of non-monetary transactions.
Topic: 06-74 Barter Transactions
51. When goods are sold f.o.b. shipping point, the revenue earnings process is usually not
considered to be complete until the buyer has received the goods and inspected them.
FALSE
Blooms: Remember
Topic: 06-02 Revenue and Expense
52. The earliest point at which all criteria for revenue recognition are met is known as a critical
event.
FALSE
Blooms: Remember
53. When a grocery store sells groceries and receives payment in the form of a cheque, the
revenue principle would state that the revenue should not be recognized until the cheque
clears the bank.
FALSE
Blooms: Remember
Topic: 06-05 The Revenue Recognition Process
54. When a one year-lease-term is signed, the lessor earns revenue with the passage of time.
TRUE
Blooms: Remember
Topic: 06-69 Reporting Example
55. Revenues must always be recognized at a single point in time.
FALSE
Blooms: Remember
56. If sales are made on "FOB destination" terms, the revenue earning process is completed when
the products are removed from the seller's place of business by the common carrier.
FALSE
Blooms: Remember
point in time.
Topic: 06-18 Recognition at Delivery
57. If fair values cannot be determined during a barter transaction, the book value method must be
used.
TRUE
Blooms: Remember
Topic: 06-74 Barter Transactions
58. Under the percentage-of-completion method of accounting for long-term construction
contracts, revenue is recognized only when the construction is completed.
FALSE
Blooms: Remember
59. Under the percentage-of-completion method of accounting for long-term construction

contracts, revenue is recognized as construction progresses (usually on the basis of costs
incurred) to attain a matching of revenues and expenses.
TRUE
Blooms: Remember
60. Under the completed contract method, all construction costs are accumulated in an inventory
account.
TRUE
Blooms: Remember
61. Bearer plants are recorded at their fair value less costs to sell.
TRUE
Blooms: Remember
Topic: 06-68 Measurement
62. Once biological assets become ready for sale, they effectively become inventory. Deemed
cost in this case is fair value of the items less their selling costs. Subsequently they are valued
at their fair value less costs to sell with gains and losses flowing to income.
TRUE
Blooms: Remember
Topic: 06-68 Measurement
63. When cash is collected on account and the instalment sales method is used, the debit is to
instalment accounts receivable and the credit is to cash.
FALSE
Blooms: Remember
point in time.
Topic: 06-22 Example - Returns Predictable
64. The completed-contract method of revenue recognition recognizes revenue on a long-term

project as work progresses so that timely information is provided.
FALSE
Blooms: Remember
65. Payment on account of progress billings, when using the percentage of completion method of
recognizing revenue are debited to cash and credited to progress billings.
FALSE
Blooms: Remember
66. A long-term contract is automatically considered onerous if a loss is recognized in any given
year.
FALSE
Blooms: Remember
67. If it becomes apparent that a long term project will result in a loss, the full amount of the loss
must be accounted for in the year it is first estimable.
TRUE
Blooms: Remember
68. Most construction companies cannot afford to wait until the completion of the contract to
collect their billings.
TRUE
Blooms: Remember
69. When using completed contract method of recognizing revenue, the billings to the customer
are debited to cash and credited to progress billings.
FALSE
Blooms: Remember
70. Non-monetary transactions by definition involve no exchange of cash.
TRUE
Blooms: Remember
Topic: 06-72 Non-Monetary Transactions
71. Non-monetary transactions lacking commercial substance can never result in a gain or loss
being recorded.
FALSE
Blooms: Remember
Topic: 06-79 Commercial Substance
72. ABC Inc. sold a DVD player to a client on June 30th, Year 2 for $150. The DVD player, which
came with a 2-year warranty, was thought to be worth $100 if sold without the warranty.
As a result of this sale, how much sales/revenue would ABC Inc. take into income on its
December 31st, Year 2 income statement?
A. $100.00.
B. $112.50.
C. $125.00.
D. $150.00.
Blooms: Remember
point in time.
Topic: 06-28 Sale with a Warranty or Service Agreement
73. Which of the following would not be considered a multiple-deliverable arrangement?
A. A product sold with a manufacturer's warranty, where both the product and warranty have
separately identifiable revenue streams.
B. A product sold with a manufacturer's warranty which covers only product assurances,
where only the product has a separately identifiable revenue stream.
C. Customer Loyalty Programs.
D. Franchise Fees.
Blooms: Remember
74. In a normal sale, generally the most uncertain factor in the revenue recognition process is:
A. The seller's fulfillment of its responsibility in the transaction

B. The measurability of the resource or item received by the seller
C. The realizability of the resource or item received by the seller
D. The relevance of the resource or item received by the seller
Blooms: Remember
75. Which of the following is not required for the recognition of revenue?
A. Receipt of cash by the seller at the time of sale.

B. Seller must receive an item ultimately realizable in cash, noncash resources, or claims to
cash.
C. The earnings process must be essentially complete.
D. The transaction must create a measurable financial statement element which fulfills the
definition of a revenue.
Blooms: Remember
76. In accounting, the term "revenue recognition" refers to:
A. Measuring the expense related to the revenue for a specific period.

B. Identifying sources of revenue.
C. Identifying transactions that result in an inflow of cash from customers.
D. Identifying the period when the customer first indicates the need for a good or service.
E. Identifying transactions that should be recorded as revenue in the current reporting period.
Blooms: Remember
77. The revenue principle states that revenue should be recognized only when a(n):
A. Exchange transaction involving goods and services has occurred and a cash down
payment has been received.
B. Exchange transaction involving goods or services has occurred and the earnings process is
essentially completed.
C. Sale or service transaction has occurred.
D. Completed earnings process can be projected.
Blooms: Remember
78. In selecting an accounting method for a newly contracted long-term construction project, the
principle factor to be considered should be:
A. The terms of payment in the contract.

B. The kind of technical facilities used in construction.
C. How reliable would an estimate be of the progress toward contract completion?
D. The method usually used by the contractor to account for other long-term construction
contracts.
Blooms: Remember
79. When work to be done and costs to be incurred on a long-term contract cannot be reliably
estimated, which of the following methods of revenue recognition is preferable?
A. Percentage-of-completion method
B. Completed contract method
C. Sales method
D. Instalment method
Blooms: Remember
80. Which of the following statements regarding the percentage-of-completion and completed
contract methods of accounting for long-term construction contracts are true?
A. They recognize different amounts of income for the construction period.

B. They produce the same inventory carrying values during the construction period.
C. Neither requires losses to be recognized in the period of occurrence.
D. Under only the percentage of completion method is it possible to recognize a loss for the
period when an overall profit is expected on the contract.
Blooms: Remember
81. Which of the following is not a difference between the percentage-of- completion and
completed contract methods of accounting for long-term construction contracts?
A. One requires estimates of completion during the construction period and the other does
not.
B. One records income (loss) each period during the construction period and the other does
not.
C. They report different inventory amounts during the construction period.
D. They cause different cash inflows during the construction period.
Blooms: Remember

supported on the basis that it:
A. Understates cost of goods sold.

B. Better conforms to the cost principle.
C. Produces a realistic matching of expenses with revenues.
D. is more conservative than the completed contract method.
Blooms: Remember
83. Choose the correct statement concerning the percentage-of-completion method of accounting
for a firm with only one current long-term construction contract in process (assume no loss is
projected):
A. The net current asset account (net of construction- in- process, and billings) exceeds that
same account under the completed contract method.
B. If the construction- in- process account exceeds the billings account, total costs to date
must exceed total billings to date.
C. If the construction- in- process account exceeds the billings account, total costs to date
must exceed total cash received on the contract to date.
D. It is possible to have both a net current asset account and a net current liability account in
this situation.
Blooms: Remember
84. Which of the following is the most conservative (slowest to recognize) revenue recognition
method?
A. Cost recovery method

B. Instalment method of revenue recognition
C. Production method
D. Percentage of completion method
Blooms: Remember
85. During the period of construction, financial information related to a long-term contract, which is
being accounted for using, the completed contract method will:
A. Appear only on the income statement during the period of construction.

B. Appear on both the income statement and balance sheet during the construction period.
C. Not appear on the financial statements.
D. Appear only on the balance sheet during the period of construction.
Blooms: Remember
86. Why is construction-in-progress increased by the annual recognized profit on long-term

construction contracts?
A. Because the contract price has increased.

B. Because the cost of the project is reduced.
C. Because work has been done.
D. Because the project's value is increased above cost.
Blooms: Remember
87. Choose the correct description of the net balance of costs in excess of billings on long-term
contracts. Assume only one current contract, and that contract price does not equal total
estimated contract cost at the end of the current year.
A. Under completed contract, the balance equals cost plus billings.

B. Under completed contract, the balance equals total estimated profit less billings.
C. Under percentage of completion, the balance equals cost to date less billings, if profit has
been recognized.
D. Under percentage of completion, the balance equals cost to date less billings, less total
projected loss.
Blooms: Remember
88. The principle disadvantage of using the percentage-of-completion method of recognizing

revenue from long-term construction contracts is that it:
A. May require that inter-period tax allocation procedures be used.

B. is likely to assign a small amount of revenue to a period during which much revenue
actually was earned.
C. is unacceptable for tax purposes.
D. Gives results based upon estimates, which may be subject to considerable uncertainty.
Blooms: Remember
89. The percentage-of-completion and completed contract methods of accounting for long-term
construction contracts will produce:
A. The same amount of income in the year of completion.

B. The same inventory carrying value each year during the construction period.
C. Equal balances each period in the Billings On Contracts account.
D. The same cost of construction (expense) each year for a project.
Blooms: Remember
90. P-Dog Inc. has a loyalty points program which awards two customer loyalty points for every
$100 of goods purchased. During the year, the company sold $200,000 of goods in the store
and awarded 4,000 points which can be redeemed and used towards future purchases. The
stand-alone selling price for the goods sold is $150,000. Based on past experience, P-Dog
expects that only 80% of the points will actually be redeemed. The stand-alone selling price of
the points is $1.50 per point. Based on the information provided, the amount of revenue that
P-Dog will report on its statement of comprehensive income for the year would be:
A. $200,000.
B. $150,000.
C. $154,800.
D. $193,798.
Blooms: Remember
Topic: 06-60 Examples of Multiple Deliverable Contracts
91. Under the completed contract method of income recognition on long-term construction
contracts:
A. The balance in the "Construction-in-Progress" account is reported on the balance sheet as

a long-term asset until the date of completion.
B. The accumulated amount in the "Construction-in-Progress" account is essentially the
amount of cost of goods sold at completion date.
C. Income is accumulated in the "Construction-in-Progress" account.
D. "Construction-in-Progress" is reduced when billings are collected.
Blooms: Remember
92. Under the percentage-of-completion method of income recognition on long-term construction

contracts:
A. No income amount is closed each period to income summary.

B. The ending inventory is the same as it would be if accounted for under the completed
contract method.
C. Income is accumulated in the "Construction-in-Progress" inventory account.
D. The percentage of completion in any year depends on the proportion of billings collected.
Blooms: Remember
93. On April 30, Green Ltd. sold land with a book value of $600,000 to Brown Ltd. for its market
value of $800,000. Brown Ltd. gave Green Ltd. a 12 percent, $800,000 note secured only by
the land. At the date of sale, Brown Ltd. was in a very poor financial position and its
continuation as a going concern was very questionable. Green Ltd. should:
A. Record a $200,000 gain on the sale of land.

B. Fully reserve the note by creating an allowance contra account.
C. Use the cost recovery method of accounting.
D. Record the note at its discounted value.
Blooms: Remember
point in time.
Topic: 06-17 Transfer of Goods and Services at a Single Point in Time
94. Net instalment accounts receivable is $5,000. Assume the instalment method of revenue
recognition is used and a gross profit percentage of 20%. Therefore:
A. $5,000 at sales price has not been collected

B. $1,250 of gross profit has been recognized
C. $6,250 at sales price has not been collected
D. $6,250 of cost has not been collected
Blooms: Remember
point in time.
95. Revenue is recognized at the time of sale under the:

B. Collection method.
C. Percentage-of-completion method.
E. Sales method when goods are sold on credit.
Blooms: Remember
point in time.
Topic: 06-47 Extent of Estimates
96. Grocery stores recognize most of their revenue based on the:

B. Specific performance method.
C. Proportional performance method.
E. Sales method.
Blooms: Remember
Topic: 06-38 Input versus Output Methods
97. Which of the following bases of revenue recognition reflects the greatest degree of uncertainty
about future critical events?
A. Sales method applied to sales of a department store

B. Cost recovery method applied to a bond investment
C. Production method on cost-plus-fixed-fee contract
D. Percentage-of-completion method on construction contract
Blooms: Remember
Topic: 06-89 Policy and Estimates
98. Revenue is recognized prior to the time of sale under the:
A. Specific performance method.

B. Completed contract method.
C. Instalment sales method.
D. Production method.
Blooms: Remember
Topic: 06-42 Measured over time
99. Which of the following methods of revenue recognition is appropriate for use by a real estate
broker whose sole activity is sale of realty on a commission basis?
A. Completed performance method

B. Specific performance method
C. Collection method
D. Proportional performance method
Blooms: Remember
100. A corporation incurred $111,000 costs to extract a diamond. The diamond turned out to be
flawed, so the company decided to break it into small pieces and sell diamond chips. The
company was uncertain if the diamond chips would sell at all. The diamond chips did sell, and
the company had the following sales and accounts receivable balances over the five following
years:
Accounts Receivable
Balance Sales
January 1, 2001 $0 $15,000 for 2001
January 1, 2002 10,500 30,000 for 2002
January 1, 2003 25,500 60,000 for 2003
January 1, 2004 40,500 24,000 for 2004
January 1, 2005 78,000 15,000 for 2005
The accountant recommended that the company use the cost recovery method of income
recognition. Using this method, the company will recognize revenue as follows:
2013 2014
1 $60,000 $60,000
2 24,000 24,000
30 0
4 6,000 0
5 Not determinable based on the data given
A. Choice 1
B. Choice 2
C. Choice 3
D. Choice 4
E. Choice 5
Blooms: Remember
Topic: 06-35 Transfer of Goods and Services Over Time
101. A corporation sold goods for $10 million during 2007. Of this amount, $6 million were in cash,
and $4 million was on account. However, the company collected $2 million of the sales on
account during 2007. In conformity with the revenue principle, the amount of revenue that
should be recognized in 2007 is:
A. $2 million
B. $4 million
C. $6 million
D. $8 million
E. $10 million
Blooms: Remember
point in time.
102. A construction company has contracted with a major university to build a new sports complex.
The contract calls for two sports arenas to be built in the next three years. The company will
receive $24,000,000 for the project and their engineers originally estimated a total cost to
construct the two arenas of $20,400,000. The two arenas are scheduled for completion in May
of 2007. If an actual cost of $9,200,000 is expended in 2004, and the engineers estimate
another $12,800,000 is to be expended to complete construction, how much income is to be
recognized under the percentage-of-completion method in 2004?
A. $836,364
B. $1,163,636
C. $2,000,000
D. $3,600,000
Blooms: Remember
103. A construction company uses the percentage-of-completion method of accounting. In 2007,
the company began work on a government contract which had a contract price of $4,000,000
and estimated costs of $3,000,000. Additional data were as follows:
2007 2008
Billing during the year 720,000 3,080,000
The portion of the total contract income to be recognized during 2007 is:
A. $120,000
B. $200,000
C. $250,000
D. $1,000,000
Blooms: Remember
104. A construction company uses the percentage-of-completion method for long-term construction
contracts. A particular job was begun in 2006 and completed 2008. During 2007, it appeared
that the project would cost 25 percent more than originally expected. Data at each year-end
are given below:
2006 2007 2008

End of year estimated cost remaining $200,000 $100,000 $-0-
Annual cost incurred 200,000 200,000 60,000
The contract price was $700,000. Assuming the company properly recorded income in 2006,
how much income should be recorded in 2007?
A. $10,000
B. $42,000
C. $160,000
D. $192,000
Blooms: Remember
105. Under the percentage-of-completion method, a company has recognized $40,000 of profit
$500,000 at that time. The contract price is $800,000. What is the percent of completion at the
beginning of the current year?
A. 13.33%
B. 15.8%
C. 8%
D. Insufficient data
Blooms: Remember
106. Given the following data, what is profit in 2007 under the percentage-of-completion method for
a project begun in 2006 with a contract price of $1,000?
2006 2007
A. $104
B. $129
C. $86
D. $61
Blooms: Remember
107. Given the following data, what is the balance in construction-in-process at the end of 2006
under the percentage of completion method for a project begun in 2006 with a contract price of
$1,100?
2006 2007
A. $100
B. $38
C. $138
D. $400
Blooms: Remember
108. Under the percentage of completion method, $400 of profit has been recognized in prior years
on a project with a contract price of $5,000. Data available as follow:
Total cost incurred till date = $3,000

Estimated costs remaining at end of current year = $2,500
What profit or loss is recognized in the current year?
A. $900 loss
B. $400 loss
C. $500 loss
D. no profit or loss
Blooms: Remember
109. A firm uses the instalment method of revenue recognition on an item with a cash selling price
of $1,000 and cost of $600. During the year of sale, the firm received $250 from the customer.
Therefore, the net instalment account receivable equals which of the following amounts at the
end of the year of sale?
A. $750
B. $450
C. $300
D. $400
Blooms: Remember
110. A firm uses the instalment method of revenue recognition on an item with a cash selling price
of $1,000 and cost of $600. During the year of sale, the firm received $250 from the customer.
Thereafter, no more cash is received. The firm repossesses the item, worth $500 at that time.
The entry to record the repossession includes:
A. Loss $350
B. Loss $250
C. Gain $200
D. Gain $50
Blooms: Remember
111. A corporation, which began business on January 1, 2006, appropriately uses the instalment
sales method of reporting for accounting purposes. The following data were available for the
years 2006 and 2007:
2006 2007
Instalment sales $1,050 $1,260
Cost of instalment sales 840 945
General and administrative expenses 105 126
Cash collected on 2006 instalment sales 450 375
Cash collected on 2007 instalment sales 600
The balance in the deferred gross profit control account on December 2007 should be:
A. $159
B. $210
C. $315
D. $525
Blooms: Remember
Topic: 06-10 Recognition of the Statement of Financial Position
112. Given the following data for a firm which uses the percentage of completion method on long-
term construction contracts, determine the ending balance of the account which is the net of
Construction- in-Process, and Billings on Contracts, at the end of Year 1, the first year of this
project.

Billings = $26,000
Cash collected = $15,000
Estimated remaining cost to complete, as of 12-31-2001 = $30,000
A. Costs in excess of billings $5,000

B. Billings in excess of costs $2,000
C. Costs in excess of billings $14,000
D. Billings in excess of costs $667
Blooms: Remember
113. The January 1, 2006 status of long-term construction project No. 6 follows. Assume the

On December 31, 2006, the estimated remaining cost to complete was still $40,000, and
$25,000 of cost had been incurred during 2006. What is the January 1, 2007 balance of
Construction-in-Process?
A. $30,000
B. $40,000
C. $45,000
D. $50,000
Blooms: Remember
114. Which of the following would be used in the calculation of the income recognized in the third
and final year of a construction contract which is accounted for using the percentage-of-
completion method?
Contract Price Actual Total Costs Income Previously Recognized

1 Yes No Yes
2 No No Yes
3 Yes Yes No
4 Yes Yes Yes
A. Choice 1
B. Choice 2
C. Choice 3
D. Choice 4
Blooms: Remember
115. The completed contract method of accounting for long-term construction-type contracts is
preferable when:
A. Estimates of costs to complete and extent of progress toward completion are reasonably
dependable.
B. The contracts are of a relatively long duration.
C. A contractor is involved in numerous projects.
D. Lack of dependable estimates or inherent hazards cause forecasts to be doubtful.
Blooms: Remember
116. When progress billings are sent on a long-term contract, what type of account should be
credited under the completed contract method and percentage-of-completion method?
Completed contract Percentage-of-completion

1 Contra asset Revenue
2 Contra asset Contra asset
3 Revenue Revenue
4 Revenue Contra asset
A. Choice 1
B. Choice 2
C. Choice 3
D. Choice 4
Blooms: Remember
117. The percentage-of-completion method of accounting for long-term construction-type contracts

is preferable when:
A. A contractor is involved in numerous projects.

B. The contracts are of a relatively short duration.
C. The collectability of progress billings from the customer is reasonably assured.
D. Estimates of costs to complete and extent of progress toward completion are reasonably
dependable.
Blooms: Remember
118. A sale should NOT be recognized as revenue by the seller at the time of sale if:
A. payment was made by cheque.

B. the selling price is less than the normal selling price.
C. the buyer has a right to return the product and the amount of future returns cannot be
reasonably estimated.
D. the goods are sold on credit.
Blooms: Remember
119. Company X has a machine with a book value of $10,000 and a fair value of $15,000.
Company Y has a machine with a book value of $16,000 and a fair value of $14,000.
Company X and Y exchange machines. In addition, Company X gives $1,000 to Company Y
as a result of the exchange. The transaction is deemed to have commercial substance and the
fair value measurement of the assets are equally reliable. Company X would record the
machine acquired from Company Y at:
A. $10,000.
B. $14,000.
C. $15,000.
D. $16,000.
Blooms: Remember
Topic: 06-83 Examples of Non-monetary Asset Exchanges
120. Company X has a machine with a book value of $10,000 and a fair value of $15,000.
Company Y has a machine with a book value of $10,000 and a fair value of $9,000. Company
X and Y exchange machines. In addition, Company X gives $1,000 to Company Y as a result
of the exchange. The transaction is deemed to lack commercial substance. Assuming that the
book value method is used, Company X would record:
A. no gain or loss on this transaction.

B. a gain of $1,000 on this transaction.
C. a loss of $1,000 on this transaction.
D. a loss of $2,000 on this transaction.
Blooms: Remember
Topic: 06-83 Examples of Non-monetary Asset Exchanges
121. When work to be done and costs to be incurred on a long-term contract can be estimated
dependably, which of the following methods of revenue recognition is preferable?
A. Instalment method.
B. Percentage-of-completion method.
C. Completed-contract method.
Blooms: Remember
122. The criteria for recognition of revenue at completion of production of precious metals and farm
products include:
A. an established market with quoted prices.

B. low additional costs of completion and selling.
C. units of production are interchangeable.
D. All of these answers are correct.
Blooms: Remember
Topic: 06-69 Reporting Example
123. The method most commonly used to report defaults and repossessions is:
A. provide no basis for the repossessed asset, thereby recognizing a loss.

B. record the repossessed merchandise at fair value, recording a gain or loss if appropriate.
C. record the repossessed merchandise at book value, recording no gain or loss.
Blooms: Remember
124. A construction company uses the percentage-of-completion method of accounting. In 2007,
the company began work on a government contract, which had a contract price of $4,000,000
and estimated costs of $3,000,000. Additional data were as follows:
2007 2008
Estimated cost to complete as of 12/31/2007 2,400,000 -0-
Calculate the gross profit to be recognized during 2007.
Contract price $4,000,000

Costs incurred during the year $600,000
Total estimated costs 3,000,000
Total estimated gross margin $1,000,000
Percentage completion 600,000/3,000,000 20%
Gross profit to be recognized: 20% of $1,000,000 = $200,000

Blooms: Apply
125. A construction company has consistently used the percentage-of-completion method of
recognizing income. In 2007, the company started work on a $6,000,000 construction contract,
which was completed in 2008. The accounting records disclosed the following data:
2007 2008
Progress billings $3,800,000 $2,200,000
Estimated cost to complete as of 12/31 3,600,000 1,800,000
Billings to the government during the year 4,600,000 1,400,000
Cash collected during the year 3,600,000
Calculate the amount of income that should have been recognized in 2007.
2007

Costs incurred during the year $1,800,000
Total estimated costs 400,000
Total estimated gross margin $600,000
Percentage completion 1,800,000/5,400,000 33.3%
Gross profit to be recognized: 33.3% of $600,000 = $200,000

Blooms: Apply
126. Under contract, ABC Corporation delivers 500 units to Customer A for $200 each on 1 March.
ABC's documented policy is to allow a customer to return any unused product within 30 days
and receive a full refund. The cost of each product is $150. Based on historical experience,
ABC estimates that 2% of the units will be returned. ABC expects that the returned products
can be resold. On March 15th, the customer returned 8 units to ABC. No other returns were
received during the month.
Required:
Record all of ABC Inc' journal entries for the month.
1 March:
Dr. Accounts Receivable (500 × $200) 100,000

Cr. Revenue 98,000
Cr. Refund liability 2,000
Dr. Cost of goods sold 73,500

Dr. Right to recovery asset 1,500
Cr. Inventory (500 × $150) 75,000
15 March:
Dr. Refund liability (8 × $200) 1,600

Cr. Accounts receivable (or cash) 1,600
Dr. Inventory (8 × $150) 1,200

Cr. Right to recovery asset 1,200
31 March:
Dr. Refund liability (2 × $200) 400

Cr. Revenue 400
Dr. Cost of goods sold (2 × 150) 300
Cr. Right to recovery asset 300

Blooms: Apply
point in time.
Topic: 06-21 Sale with a Right of Return
127. Under contract, ABC Corporation delivers 500 units to Customer A for $200 each on 1 March.
ABC's documented policy is to allow a customer to return any unused product within 30 days
and receive a full refund. The cost of each product is $150. ABC expects that the returned
products can be resold. On March 15th, the customer returned 8 units to ABC. No other returns
were received during the month.
Required:
Record all of ABC Inc' journal entries for the month, assuming that ABC cannot reasonably
estimate the amount of returns on March 15th.
1 March:
Dr. Accounts Receivable (500 × $200) 100,000

Cr. Refund liability 100,000
Dr. Right to recovery asset 75,000

Cr. Inventory (500 × $150) 75,000
15 March:

Cr. Accounts receivable (or cash) 1,600
Dr. Inventory (8 × $150) 1,200

31 March:

Cr. Revenue 98,400
Dr. Cost of goods sold (92 × 150) 73,800

Blooms: Apply
point in time.
Topic: 06-21 Sale with a Right of Return
128. Given the following data, calculate profit recognized in 2007 under the percentage of
completion method for a project begun in 2007 with a contract price of $1,000?
2007 2008
2007

Costs incurred during the year $100
Estimated costs to complete, as of 12/31/2007 700
Total estimated costs 800
Total estimated gross margin $200
Percentage completion 100/800 12.5%
Gross profit to be recognized: 12.5% of $200 = $25

Blooms: Apply
129. On January 1, 2016, XYZ Inc. delivers a machine to a buyer. The agreed-upon price is $9,000.
Included in this price is a twenty-four-month service contract, which stipulates that the system
will be fixed or replaced if it does not perform to certain specifications and 20 hours of service
to maintain the system over this period. The stand-alone price for the maintenance service is
$2,000. The buyer also opted for the twenty-four-month warranty, which XYZ sells separately
for $1,000. The company also estimates that based on past experience, the warranty costs for
defective machinery should be estimated at $450 per year. During Year 1, 8 hours of service
are performed, as expected, at a cost of $800, and warranty work resulted in expenditures of
$300.
Required:
uses the revenue deferral approach to account for its warranties.
Jan 1, 2016
Accounts Receivable 10,000
Revenue 7,000
Contract Liability - Service 2,000
Contract Liability - Warranty 1,000
Dec 31, 2016

Warranty Expense 300
Cash, Parts etc. 300
Service Expense 800
Cash 800

Service Revenue 1,000
Contract Liability - Warranty 500
Warranty Revenue 500

Blooms: Apply
point in time.
Topic: 06-30 Entries - Cost Deferral
130. On January 1, 2016, XYZ Inc. delivers a machine to a buyer. The agreed-upon price is $9,000.
Included in this price is a twenty-four-month service contract, which stipulates that the system
will be fixed or replaced if it does not perform to certain specifications and 20 hours of service
to maintain the system over this period. The stand-alone price for the maintenance service is
defective machinery should be estimated at $450 per year. During Year 1, 8 hours of service
are performed, as expected, at a cost of $800, and warranty work resulted in expenditures of
$300.
Required:
uses the cost deferral approach to account for its warranties.
Jan 1, 2016
Accounts Receivable 9,000
Revenue 7,000
Warranty Expense 450

Provision for Warranties 450
Dec 31, 2016

Provision for Warranties 450
Cash/Parts etc. 300
Recovery of Warranty 150
Service Expense 800
Cash 800

Service Revenue 1,000

Blooms: Apply
point in time.
Topic: 06-30 Entries - Cost Deferral
131. Given the following data, calculate profit recognized in 2008 under the percentage of
completion method for a project begun in 2008 with a contract price of $1,000?
2007 2008
2007

Gross profit to be recognized: 12.5% of $200 = $25
2008

Gross profit to be recognized: 300/700 × $300 less $25 = $104

Blooms: Apply
132. A company began work on a government contract at the start of 2007. The contract was to
construct a special building for $4,000,000. In making the bid, construction costs were
estimated to be $3,000,000. Data during the construction period was:
2007 2008
Estimated cost to complete as of 12/31 2,400,000 -0-
Billings to the government during the year 720,000 3,280,000
Cash collected during the year 500,000 3,500,000
How much income on the contract would be reported for each year assuming:
(a) Completed contract method?

2007: $______________ 2008: $_______________.
(b) Percentage-of-completion method? (basis: estimated costs to complete)
2007: $________________ 2008: $_______________.
(a) 2007: -0- 2008: $4,000,000- $600,000 - $2,550,000 = $850,000

(b) 2007: $1,000,000 × (600/3,000) = $200,000
2008: $4,000,000 - $600,000 - $2,550,000 = $850,000 - $200,000 = $650,000

Blooms: Apply
133. A company entered into a contract to construct a building for a fee of $50,000. Construction
began in 2006 and was completed in 2008. Transactions related to the contract are
summarized below:
2006 2007 2008

Construction costs incurred to date $8,000 $16,600 $15,900
Estimated costs to complete 32,000 16,400 -0-
Billings and collections during year 7,500 20,000 22,500
Compute the income that should be recognized each year using (a) the percentage-of-
completion method and (b) the completed contract method.
[2006 | 2007 | 2008]

(a) $____________ $_______________ $______________
(b) $____________ $_______________ $______________
(a) 2006: $10,000 × (8/40) = $2,000

2007: $50,000 - $41,000 = $9,000 × (24,600/41,000) = $5,400 - $2,000 = $3,400
2008: $50,000 - $8,000 - $16,600 - $15,900 - $2,000 - $3,400 = $4,100
b) 2001 and 2002: zero
2003: $50,000 - $8,000 - $16,600 - $15,900 = $9,500

Blooms: Apply
134. A construction company entered into a three-year contract to erect a building for a customer.
Its original bid on the job was for $3,600,000 but this was revised upward in year 3 to
$3,900,000 because the customer negotiated for some "extras" (modification in the original
specifications). A cumulative history of costs incurred and cost expectations throughout the
three years the contract was in progress is set out below. Give the income to be reported (a)
using the percentage-of-completion method, and (b) using the completed contract method.

Expected revenues $3,600,000 $3,600,000 $3,900,000
Actual costs (cumulative) 750,000 2,550,000 3,270,000
Expected future costs 2,250,000 525,000 -0-
(a) Income using percentage-of-completion

(b) Income using completed contract
(a) (b)
Percentage of Completion Completed Contract
Year 1: $3,600,000 - $750,000 - $2,250,000
$600,000 × ($750/$3,000) = $150,000 $-0-
Year 2: $3,600,000 - $2,550,000 - $525,000
$525,000 × (2,250/3,075) - $150,000 = $285,366 $-0-
Year 3: $3,900,000 - $3,270,000 =$630,000
$630,000 - $150,000 - $285,366 = $194,634 $630,000

Blooms: Apply
Difficulty: 3 Hard
135. A shipyard contracted with a foreign government to build a small naval vessel. The contract
calls for the foreign government to pay the shipyard $10,000,000 upon the completion and
delivery of the vessel in 2008. The shipyard engineers estimated the costs to complete the
vessel at $8,200,000. Under each of the situations that follow, show the income that would
have to be reported assuming the percentage-of-completion method is used to recognize
income. Show your computations.
a. Income to be reported in 2006, assuming $2,000,000 has been spent and the engineers
estimate an additional $6,800,000 will be spent to complete the vessel. 2001 income that
should be reported is (pick one below):
$280,000
$272,727
$1,200,000
Computations:
b. Income to be reported in 2007, assuming $6,000,000 has already been spent and the
engineers estimate an additional $3,4000,000 will be spent to complete the vessel. 2007
income is (pick one below):
$110,252
$382,978
$548,936
Computations:
c. Income to be reported in 2008, assuming $8,800,000 has already been spent to complete
and deliver the vessel to the foreign government, which immediately paid their bill. 2008
income is (pick one below):
$961,022
$777,332
$600,000
$1,200,000
$817,021
Computations:
(a) ($10,000,000 - $8,800,000 × ($2,000/$8,800) = $272,727

(b) ($10,000,000 - $9,400,000 × ($6,000/$9,400) - $272,727 = $110,252
(c) ($10,000,000 - $8,800,000) - $272,727 - $110,252 = $817,021

Blooms: Apply
Difficulty: 3 Hard
136. The following data are available from a company for a long-term construction contract:
2006 2007 2008

Construction costs incurred to date $400,000 $1,600,000 $1,900,000
Estimated costs to completion 1,400,000 450,000
The contract price for the three-year contract was $2,100,000 and the estimated cost at the
beginning of the contract was $1,800,000.
(a) What is the amount of income that will be reported under the percentage-of-completion
method in 2006?
$
(b) What is the amount of income that will be reported under the percentage-of-completion
$
(c) What is the amount of income that will be reported under the percentage-of-completion
$
(a) ($2,100,000 - $1,800,000 × ($400/$1,800) = $66,667

(b) ($2,100,000 - $2,050,000 × ($1,600/$2,050) - $66,667 = $27,643 loss
(c) ($2,100,000 - $1,900,000 - $66,667 + $27,643 = $160,976

Blooms: Apply
Difficulty: 3 Hard
137. The records of a construction company provided the following data on along-term construction
contract (3 years), which was just completed.
Construction contract price. $1,425,000
Estimated total cost (at start). $1,200,000
At end of 2001 At end of 2002 At end of 2003

Costs incurred to date:
(cumulative) $300,000 $480,000 $1,245,000
Estimated cost to complete 900,000 750,000 Completed
Progress billings to date:
(cumulative) 240,000 465,000 1,425,000
Progress collections to date:
(cumulative) 210,000 450,000 1,425,000
Complete the following partial financial statements for each year (assume percentage-of-
completion is based on costs incurred to total costs) (Hint: complete CC for all years, then
complete PC)*:
2001 2002 2003

CC PC CC PC CC PC
Income Statement Income on construction $ ___ $ ___ $ ___ $ ___ $ ___ $ ___
Balance Sheet Accounts receivable ___ ___ ___ ___ ___ ___
Inventory Construction in process ___ ___ ___ ___ ___ ___
Less ___ ___ ___ ___ ___ ___
Costs in excess of billings ___ ___ ___ ___ ___ ___
*CC = Completed contract; PC = Percentage of completion.
2001 2002 2003

CC PC CC PC CC PC
Income Statement Income on construction $-0- $56,250 $-0- $19,848 $180,000 $103,902
Balance Sheet Accounts receivable 30,000 30,000 15,000 15,000 -0- -0-
Inventory Construction in process 300,000 356,250 480,000 556,098 -0- -0-
Less 240,000 240,000 465,000 465,000 -0- -0-
Costs in excess of billings 60,000 116,250 15,000 91,098 -0- -0-
2001: ($1,425,000 - $1,200,000) × ($300/$1,200) = $56,250

2002: ($1,425,000 - $1,230,000 × ($480/$1,230) - $56,250 = $19,848
2003: $1,425,000 - $1,245,000 = $180,000 - $56,250 - $19,848 = $103,902
Blooms: Apply
Difficulty: 3 Hard
138. On January 1, 2007, a contractor started a construction project for $1,350,000; estimated
construction costs (total) were $1,050,000. Data for the two-year period:
2007 2008
Actual construction costs during the year $600,000 $465,000
Estimated remaining costs to complete the contract 450,000 -0-
Actual amount billed to the customer during the year 540,000 810,000
Actual cash collected from the customer during the year 525,000 825,000
Based upon the above data, provide the following amounts for each method:

2007 2008 2007 2008
(a) Income on construction $ $ $ $
(b) Construction in progress $ $ $ $
(c) Costs in excess of billings $ $ $ $

2007 2008 2007 2008
(a) Income on construction -0- $285,000 $171,429c $113,571d
(b) Construction in progress $600,000 -0- $771,429 -0-
(c) Costs in excess of billings $60,000a -0- $231,429 -0-
(a) $600,000 - $540,000 = $60,000

(b) $1,350,000 - $1,065,000 = $285,000
(c) ($1,350,000 - $1,050,000) × (600/1,050) = $171,429
(d) $285,000 - $171,429 = $113,571
Blooms: Apply
Difficulty: 3 Hard
139. A construction company signed a contract to build a plant for a customer. Construction
covered a four-year period. Data concerning the construction were as follows:

Estimated costs = $600,000
Actual results:
Actual costs Billings

Year 1*. $120,000 $100,000
Year 2*. 100,000 110,000
Year 3*. 240,000 240,000
Year 4*. 160,000 330,000
*No change in estimated costs.

Using the information above, answer the following questions:
(a) How much income will be reported in Years 1, 2, 3, and 4 if the completed contract method
is used?
Year 1: $
Year 2: $
Year 3: $
Year 4: $
(b) How much income will be reported each year if the percentage-of-completion method is
used?
Year 1: $
Year 2: $
Year 3: $
Year 4: $
(c) What net amount would be reported on the balance sheet for contracts in process at the
end of year 1 if the completed contract method is used?
$
(d) What net amount would be reported on the balance sheet for contracts in process at the
end of year 1 if the percentage-of-completion method is used?
$
(a) Year 1: $ -0-

Year 2: $ -0-
Year 3: $ -0-
Year 4: $780,000 - $120,000 - $100,000 - $240,000 - $160,000 = $160,000
(b) Year 1: ($780,000 - $600,000) × ($120/$600) = $36,000
Year 2: ($780,000 - $600,000) × ($220/$600) - $36,000 = $30,000
Year 3: ($780,000 - $600,000) × ($460/$600) - $36,000 - $30,000 = $72,000
Year 4: $780,000 - $620,000 = $160,000 - $36,000 - $30,000 - $72,000 = $22,000
(c) $120,000 - $100,000 = $20,000
(d) $120,000 + $36,000 - $100,000 = $56,000

Blooms: Apply
Difficulty: 3 Hard
140. On June 15, 2007, AB Construction Company signed a $180,000 contract to build a small
structure for XY Company. AB estimated that total cost to construct would be $160,000.
Construction started immediately because the required completion date was August 31, 2008.
AB's relevant data relating to this construction project were as follows:
2007 2008 Total

Actual cost incurred by year $60,000 $102,000
Estimated costs to complete 100,000 -0-
Progress billings (to XY) by year 56,000 124,000
Collections (XY) cash by year 55,000 125,000
Required:
1. How much income should AB recognize each year, assuming:

(a) Completed contract $ $
(b) Percentage-of-completion $ $
2. What amounts should AB report on the balance sheet at the end of each year for:

Percentage-of-completion method $ $
Percentage completion method $ $
3. Give the entry to record income for 2007, assuming the percentage-of-completion method is
used.
1.

(a) Completed contract -0- $18,000
(b) Percentage-of-completion $7,500* $10,500**
*(180,000 - $160,000) × 60/160 = $7,500
**$18,000 - $7,500 = $10,500
2.

Completed contract method $1,000 -0-
Percentage-of-completion method $1,000 -0-
Completed contract method:
Construction in process inventory $60,000 -0-

Less: Billings on contracts 56,000 -0-
Cost in excess of billings $4,000 -0-
Percentage completion method:
Construction in process inventory $67,500 -0-

Less: Billings on contracts 56,000 -0-
Cost in excess of billings $11,500 -0-
3.
Inventory of construction in process. 7,500
Income from construction. 7,500
or:
Costs of construction 60,000

Construction in process 7,500
Construction income 67,500

Blooms: Apply
Difficulty: 3 Hard
141. On January 1, 2007, a corporation signed a contract to build a specially designed plant; the
relevant data were (in 000's):

Estimated total construction cost = $10,500
Data during construction period (January, 1, 2007-December 31, 2008):
12/31/2007 12/31/2008
Actual cost to date (cumulative) $2,160 $10,875
Actual progress billings to date (cumulative) 2,100 13,500
Actual collections to date (cumulative) 2,055 13,500
Estimated remaining cost to complete 8,640 -0-
Required:
(1) Give the following amounts that should be reported on the income statement and balance
sheet:

2007 2008 2007 2008
(a) Income from construction
(b) Accounts receivable
(c) Invoice construction (net asset)
(2) Give the entry to record 2007 construction income at December 31, 2008, for the
percentage-of-completion method.
1.

2007 2008 2007 2008
(a) Income from construction -0- $2,625a $540d $2,085g
(b) Accounts receivable $45b -0- $45e -0-
(c) Invoice construction (net asset) $60c -0- $600f -0-
a. $13,500 - $10,875 = $2,625

b. $2,100 - $2,055 = $45
c. $2,160 - $2,100 = $60
d. $13,500 - $2,160 - $8,640 = $2,700 × ($2,160/$120,800) = $540
e. $2,100 - $2,055 = $45
f. $60/$540 = $600
g. $2,625 - $540 = $2,085
2.
Inventory of construction in process 540

Income from construction 540
or:
Costs of construction 2,160

Construction in process 540
Construction income 2,700

Blooms: Apply
Difficulty: 3 Hard
142. A large construction firm, which uses the percentage of completion method, provided the
following information concerning one of its contracts (contract price, $1,000).

Cost incurred in year $200 $300 $250
Remaining cost to complete at end of year
Refer to the following two questions. The answer to question (b) depends on the answer to (a).
(a) What is the balance in construction in process at the end of year 1?

(b) Assume that $600 is the estimated remaining cost at the end of year 2. Provide the entry to
record revenue for year 2. Explain the ending balance in construction in process.
(a) $200 + ($200/$600)($1,000 - $600) = $333

(b)
Construction expense 300

Construction in process 8*
Construction revenue 292**
** Revenue recognized in year 1 = $1,000($200/$600) = $333

($500/$800)$1,000 - $333 = $292
through year 2 = ($500/$800)($1,000 - $800) = $125
Profit in year 1 = ($200/$600)($1,000 - $600) = 133
Loss recognized in year 2 (not an overall loss) = $8
The balance in construction in process at the end of year 2 represents total cost to date ($500)
plus total profit to date ($125) or $625
Blooms: Apply
Difficulty: 3 Hard
143. A company sold goods for $100,000 during 2007. Of this amount, $60,000 was cash and
$40,000 was on account. The company collected $20,000 of the sales on account during
2001. In conformity with the revenue principle, the amount of revenue that should be
recognized in 2007 is ___________________.
$100,000, the revenue earned.

Blooms: Apply
144. A company incurred the following costs and received the following collections from customers
Costs Collections
2001 $120,000 -0-
2002 20,000 $80,000
2003 20,000 40,000
2004 10,000 100,000
2005 -0- 8,000
(a) If the company used the cost recovery method of revenue recognition, the income that
should be recognized in 2003 is ___________________.
(b) If the cost recovery method continues to be used through 2004, the amount of 2004
income that should be recognized is ____________________.
(a) -0- cost still exceeds revenue.

(b) Costs through 2004 are $170,000. Collections exceeds costs by $220,000 - $170,000 =
$50,000.

Blooms: Apply
Difficulty: 3 Hard
145. The following data relates to a firm, which grants a liberal right of return to its customers:

The firm is unable to estimate returns
Required:
(c) The entry during the following year assuming the $5,000 of goods is returned before the
(d) The entry during the following year assuming the return privilege expired on the $5,000 of
accounts receivable.
(a) Entries during the year:
Accounts receivable 100,000

Sales 100,000
Cost of goods sold 60,000
Inventory 60,000
Cash 60,000
Sales returns 20,000
Inventory 12,000
Adjusting journal entry:
Sales 5,000
Deferred gross profit 2,000
(b) Balance sheet accounts, ending balances
Accounts receivable $20,000

Deferred gross profit (2,000)
Net accounts receivable $18,000
Income Statement
Sales $95,000
Net sales 75,000
Gross profit 30,000
(c) Entry assuming return before privilege expires
Inventory 3,000
(d) Entry assuming return privilege expires

Sales 5,000

Blooms: Apply
Difficulty: 3 Hard
146. The following data relates to a firm, which grants a liberal right of return to its customers:

The firm anticipates a 30% total sales return rate and all other criteria are met.
Required:
(c) The entry during the following year assuming that $10,000 of goods is returned before the
(d) The entry during the following year assuming that only $8,000 of goods are returned
before the return privilege expired.
(a) Entries during the year:

Sales 100,000
Inventory 60,000
Cash 60,000
Inventory 12,000
Adjusting journal entry:
Estimated sales returns 10,000*

*.30($100,000) - $20,000 actual returns
(b) Balance sheet accounts, ending balances
Sales $100,000
Sales returns 30,000*
Net sales 70,000
Gross profit 28,000
*Includes estimated and actual returns

(c) Entry assuming $10,000 of goods are returned the following year
Inventory 6,000
(d) Entry assuming $8,000 of goods are returned the following year
Inventory 4,800
Sales 2,000

Blooms: Apply
Difficulty: 3 Hard
147. A firm sold merchandise costing $600 for $1,000 on January 1, 2001. The selling firm
accepted a note with terms calling for two equal annual payments (which include 10% interest,
and principal) beginning December 31, 2001. There is sufficient uncertainty about the
realizability of the two payments to warrant the instalment method of revenue recognition.
Required:
assuming the 2 payments were received as expected, provide the entries to account for the
sale and cash collections (assume a perpetual inventory system).
Payment amount: $1,000 = P(PVA,10%,2) = P(1.73554) P = $576

Jan. 1, 2001
Notes receivable 1,000

Instalment sales 1,000
Cost of goods sold 600
Inventory 600
Dec.31,2001
Instalment sales 1,000

Cost of goods sold 600
Deferred gross profit 400
Cash 576
Interest revenue 100 .10($1,000)
Notes receivable 476
Deferred gross profit 190 ($576 - $100).40
Realized gross profit 190
Dec. 31, 2002
Cash 576
Interest revenue 52 .10($1,000 - $476)
Notes receivable 524
Deferred gross profit 210 ($524).40
Realized gross profit 210

Blooms: Apply
Difficulty: 3 Hard
148. The following information relates to the sale of an item of merchandise:
Selling price = $100

Cost = $70
Cash collected on sale to date = $40
For each of the independent revenue recognition situations below, determine the net balance
in accounts receivable given the above information, and provide an interpretation of each.
(1) The right of return on the sale has not expired; all criteria of CICA Handbook Sec. 3400 are
met and this item is not expected to be returned.
(2) The right of return on the sale has not expired; not all criteria of CICA Handbook, Sec. 3400
are met.
(3) The instalment method of revenue recognition is used to account for the sale.
(4) The cost recovery method of revenue recognition is used to account for the sale.
(5) Answer (4) assuming $80 cash has been collected to date.
(1) Net accounts receivable = $100 - $40 = $60. Because all criteria of CICA Handbook, Sec.
3400 are met, and this item is not expected to be returned, the entire sale is recognized. The
$60 is that portion of the sales price yet to be collected.
(2) Net accounts receivable = $30, the cost of the item not yet reimbursed. Because not all
criteria of CICA Handbook, Sec. 3400 are met and the right of return privilege has not expired,
the account receivable is shown at $100 - $40 cash collected - $30 gross profit on the sale
(which cannot be recognized at this point). Measurement of the remaining receivable at selling
price would imply recognition of revenue.
(3) Recognized gross profit to date =.30($40) = $12. The remaining $18 of gross profit cannot
be recognized before collection. Net accounts receivable = $100 - $40 - $18 = $42 or $60(1 -
.3). This is the amount owed by the customer measured at cost.
(4) No gross profit has been recognized to date as the costs have not been recovered.
Therefore, net accounts receivable equals the cost yet to be reimbursed, $100 - $40 - $30
gross profit = $30. To this point, the $40 cash plus the $30 net accounts receivable has
replaced $70 of inventory in the balance sheet of the seller.
(5) $10 of gross profit may now be recognized (the excess of $80 cash collected over the $70
cost of the item). $20 of gross profit remains to be recognized. Therefore, net accounts
receivable = $100 - $80 cash collected - $20 gross profit yet to be recognized = $0. The
recognition of the remaining $20 of profit is holding up the recognition of the remaining $20 of
asset, until collection. To recognize a net receivable would imply profit recognition before cash
collection, a contradiction of the method. As additional amounts are collected, they will be
recognized as revenue.

Blooms: Apply
Difficulty: 3 Hard
149. A firm using the instalment method of revenue recognition repossessed an item it sold for
$40,000 (cost $24,000) after the customer stopped remitting cash. Only $26,000 was paid by
the customer to the date of repossession at which time the item is worth only $8,000.
(1) Determine the accounting gain or loss on repossession.

(2) Determine the economic gain or loss-the change in the value of the firm-as a result of the
sale and repossession.
(3) Reconcile total accounting earnings with the value you computed in (2).
(1) Gross profit percentage = (40 - 24)/40 =.40

Net accounts receivable = $14,000(1 -.40) = $8,400
Market value of item 8,000
Loss on repossession $400
(2) Economic or out-of-pocket gain = $26,000 cash received + $8,000
market value - $24,000 cost of the item = $10,000 gain.
(3) Gross profit recognized on sale = $26,000(.40) = $10,400
Loss on repossession from (1) = $400
Net increase in accounting earnings = $10,000
This amount equals the economic gain in (2). Thus the accounting earnings, although they
may be recognized in more than one period, equal the economic value change.

Blooms: Apply
Difficulty: 3 Hard
Topic: 06-35 Transfer of Goods and Services Over Time
150. Under the percentage of completion method, a company has recognized $40,000 of profit
$500,000 at that time. The contract price is $800,000. Calculate the percent of completion at
the beginning of the current year.

Total estimated costs 500,000
Total estimated gross margin $300,000
Gross profit recognized to date 40,000


Blooms: Apply
151. Given the following data for a firm which uses the percentage of completion method on long-
term construction contracts, determine the ending balance of the account which is the net of
Construction in Process, and Billings on Contracts, at the end of Year 1, the first year of this
project.
Costs incurred $20,000

Billings 26,000
Cash collected 15,000
Estimated remaining cost to complete, as of 12-31-2001 30,000

Estimated remaining cost to complete,
As of 12-31-2001 = $30,000
Total estimated costs = $50,000
Total estimated gross profit = $10,000
Gross profit recognized 20,000/50,000 × 10,000 = 4,000

Construction is process is cost plus gross profit
Costs incurred 20,000

Gross profit to date 4,000
Total inventory 24,000
Less billings on contract 26,000
Excess of billings over cost 2,000

Blooms: Apply
152. In 2005, Tamarack Corporation began construction work under a three-year contract. The
contract price is $1,200,000. Evian uses the percentage of completion method for financial
accounting purposes. The income to be recognized each year is based on the proportion of
cost incurred to total estimated costs for completing the contract. The financial statement
presentations relating to this contract at December 31, 2005, follow:
Balance Sheet:
Construction in progress $150,000
Less contract billings 120,000
Cost of uncompleted contract in excess of billings $30,000
Income Statement:
Income (before tax) on the contract recognized in 2005 $30,000
Accounts receivable construction
Calculate how much cash was collected in 2005 on this contract.

Ending balance in accounts receivable 50,000
Collections on account during 2005 $70,000

Blooms: Apply
Difficulty: 3 Hard
153. Minty Inc. began work in 2006 on contract #3814, which provided for a contract price of
$4,500,000. Other details follow:
2006 2007
Estimated costs to complete as of December 31 2,400,000 0
Assume that Blaze uses the percentage-of-completion method of accounting, calculate the
portion of the total gross profit to be recognized as income in 2006.

Costs incurred during the year 800,000
Total estimated gross margin 1,300,000
Percentage completion 800/3,200 25%

Blooms: Apply
154. Grandon Ltd. began work in 2006 on a contract for $5,400,000. Other data are:
2006 2007
Costs to date $1,800,000 $4,300,000
Billings to date 2,000,000 5,400,000
Assuming Grandon uses the percentage-of-completion method, calculate the gross profit to be
recognized in 2006.

Costs incurred to date 1,800,000
Total estimated gross margin 900,000
Percentage completion 1,800/4,500 40%

Blooms: Apply
155. Grandon Ltd. began work in 2007 on a contract for $5,400,000. Other data are:
2006 2007
Costs to date $1,800,000 $4,300,000
Billings to date 2,000,000 5,400,000
Assuming Grandon uses the completed contract method, calculate the gross profit to be
recognized in 2008.

Costs incurred to end of 2002 4,300,000
Total gross margin $1,100,000

Blooms: Apply
156. The January 1, 2006 status of long-term construction project No. 6 follows. Assume the

On December 31, 2006, the estimated remaining cost to complete was still $40,000, and
$25,000 of cost had been incurred during 2006. Calculate the January 1, 2007 balance of
Construction in Process.
Cost incurred to January 1, 2006 $20,000

Cost incurred during 2006 25,000
Cost to complete project 40,000
Total estimated cost 85,000
Accrue loss and reduce inventory $5,000
Balance of work in process inventory:
Cost incurred to January 1, 2006 $20,000

Cost incurred during 2006 25,000
Less loss on contract accrued (5,000)
Balance January 1, 2007 balance $40,000

Blooms: Apply
Difficulty: 3 Hard
157. Company A exchanges machinery with Company B. In addition, Company A gave $10,000 to
Company B as part of the exchange.
Company A's equipment had a book value of $20,000 and a fair value of $8,000.
Company B's equipment had a book value of $25,000 and a fair value of $15,000.
Provide the entry on Company A's books assuming that"
i) The transaction has commercial substance.

ii) The transaction has no commercial substance (use the book value method).
i)
Equipment (new) 15,000

Loss 15,000
Cash 10,000
Equipment (old) 20,000
ii)
Equipment (new) 30,000

Cash 10,000
Equipment (old) 20,000

Blooms: Apply
Difficulty: 3 Hard
Topic: 06-79 Commercial Substance
Chapter 6 Summary
Category # of Questio
ns
Accessibility: Keyboard Navigation 123
Beechy - Chapter 06 157
Blooms: Apply 34
Blooms: Remember 123
Difficulty: 1 Easy 28
Difficulty: 2 Medium 111
Difficulty: 3 Hard 18
Learning Objective: 06-01 Understand the revenue recognition process and criteria. 41
Learning Objective: 06- 22
02 Apply the revenue recognition criteria to various types of revenue earned by the transfer of goods and services at a sin
gle point in time.
03 Apply the revenue recognition criteria to various types of revenue earned by the transfer of goods and services over ti
me.
04 Understand how revenue earned from long term contracts is measured, recognized and reported.
Learning Objective: 06-05 Understand the revenue recognition for contracts involving multiple goods and services. 6
Learning Objective: 06-06 Understand and account for agricultural produce and biological assets. 7
Learning Objective: 06-07 Understand the measurement and recognition of non-monetary transactions. 7
Topic: 06-01 Definitions 5
Topic: 06-02 Revenue and Expense 2
Topic: 06-03 Gains and Losses versus Revenue and Expense 5
Topic: 06-04 Presentation 1
Topic: 06-05 The Revenue Recognition Process 6
Topic: 06-06 Economic Value Added 1
Topic: 06-07 General Revenue Recognition Principle 14
Topic: 06-08 The Earnings-Based Approach 3
Topic: 06-09 The Contract-Based Approach 1
Topic: 06-10 Recognition of the Statement of Financial Position 1
Topic: 06-12 Contract-Based Revenue Recognition Requirements 5
Topic: 06-13 Collectability 1
Topic: 06-17 Transfer of Goods and Services at a Single Point in Time 3
Topic: 06-18 Recognition at Delivery 2
Topic: 06-21 Sale with a Right of Return 2
Topic: 06-22 Example - Returns Predictable 1
Topic: 06-23 Five Steps 1
Topic: 06-25 Example - Returns Not Predictable 2
Topic: 06-27 Summary 1
Topic: 06-28 Sale with a Warranty or Service Agreement 3
Topic: 06-29 Five Steps 1
Topic: 06-30 Entries - Cost Deferral 2
Topic: 06-33 Bill-and-Hold Arrangements 3
Topic: 06-34 Consignment Arrangements 3
Topic: 06-35 Transfer of Goods and Services Over Time 2
Topic: 06-37 Measuring Progress Over Time 3
Topic: 06-38 Input versus Output Methods 2
Topic: 06-39 Estimating Costs 46
Topic: 06-40 Measurement not possible 4
Topic: 06-41 Long-Term Contracts Measured Over Time 59
Topic: 06-42 Measured over time 2
Topic: 06-43 Estimating Revenue 4
Topic: 06-44 Recording 1
Topic: 06-46 Estimating Revenue 4
Topic: 06-47 Extent of Estimates 2
Topic: 06-48 Long-Term Contract - Recognized at a Single Point in Time 1
Topic: 06-49 Contractor Control of the Asset 1
Topic: 06-50 Licensing Fees 1
Topic: 06-53 Gross or Net Revenue? 1
Topic: 06-55 Non-refundable payments 1
Topic: 06-57 Non-cash consideration 1
Topic: 06-58 Multiple Goods and Service Contracts 3
Topic: 06-60 Examples of Multiple Deliverable Contracts 1
Topic: 06-62 Franchise Fees 1
Topic: 06-66 Agricultural Produce and Biological Assets 1
Topic: 06-68 Measurement 2
Topic: 06-69 Reporting Example 2
Topic: 06-71 Biological Assets Not Immediately Saleable 2
Topic: 06-72 Non-Monetary Transactions 1
Topic: 06-74 Barter Transactions 2
Topic: 06-79 Commercial Substance 2
Topic: 06-83 Examples of Non-monetary Asset Exchanges 2
Topic: 06-89 Policy and Estimates 1
Another random document with
no related content on Scribd:
merkit ja siten tavallaan tuhottu heidän muistonsa, sillä hyvin
säilyneistä muistomerkeistä voi tosin lukea, kuka on haudattu, mutta
ei mihin, ja viimeksimainittua seikkaa monet väittivät tärkeimmäksi.
Samaa mieltä oli eräs naapuriperhe, joka oli useita vuosia sitten
varannut omaisillensa sijan tässä yleisessä kalmistossa ja senvuoksi
tehnyt kirkolle pienen lahjoituksen. Nyt oli nuori lakimies lähetetty
lahjoitusta peruuttamaan ja ilmoittamaan, ettei tultaisi enää mitään
maksamaan, koska ehto, jonka mukaisesti se oli tähän saakka
tapahtunut, oli yksipuolisesti kumottu ja kaikki huomautukset ja
vastalauseet jätetty huomioonottamatta. Charlotta, muutoksen
toimeenpanija, tahtoi puhutella nuorta miestä itseänsä, joka selosti
omia ja esimiehensä perusteita, tosin vilkkaasti, mutta ei liian
äänekkäästi, antaen kuuntelijoille paljon ajattelemisen aihetta.
Te huomaatte, lausui hän lyhyen johdannon jälkeen, jossa osasi

puolustaa tungettelevaisuuttansa: te huomaatte, että halvin
samoinkuin ylhäisinkin pitää tärkeänä sen paikan merkitsemistä, joka
on hänen omaistensa leposijana. Köyhimmälle maamiehelle, joka
hautaa lapsensa, on jonkinlaiseksi lohdutukseksi, kun voi pystyttää
haudalle heikon puuristin, koristaa sen seppeleellä, jotta muisto
säilyy ainakin niin kauan kuin kestää suru, joskin sellainen merkki,
samoinkuin itse surukin, ajan pitkään häviää. Varakkaat pystyttävät
puuristien sijaan rautaisia, lujittavat ja suojaavat niitä kaikin tavoin, ja
siten saadaan merkit säilymään useita vuosia. Mutta koska nekin
vihdoin vajoavat ja ruostuvat, katsovat varakkaat henkilöt
välttämättömäksi kohottaa kiven, joka lupaa kestää useiden
sukupolvien ajan ja jota jälkeläiset voivat uudistaa ja korjata. Mutta
meitä ei vedä puoleensa tuo kivi, vaan se, mitä on sen alla, se, mitä
maa sen vieressä kätkee poveensa. Ei ole kysymyksessä niinkään
muisto kuin itse henkilö, ei menneisyys, vaan nykyisyys. Rakastettua
vainajaa syleilen paljoa mieluummin ja hartaammin hautakummussa
kuin muistomerkissä, sillä viimeksimainittu merkitsee oikeastaan
sinänsä varsin vähän; mutta sen ympärille, kuten rajapyykin
ympärille, tulee puolisoiden, sukulaisten ja ystävien vielä
kuoltuansakin kokoontua, ja elävillä tulee olla oikeus torjua ja häätää
vieraita ja pahansuovia rakkaitten vainajiensa vaiheilta.
Olen senvuoksi sitä mieltä, että esimiehelläni on täysi oikeus

peruuttaa lahjoitus; onpa tämä menettely varsin lieväkin, sillä
perheen jäseniä on loukattu niin, ettei mikään korvaus ole
ajateltavissakaan. He eivät voi enää tuskaisen suloisin tuntein tarjota
rakkaillensa kuolinuhria ja poissa on nyt se lohdullinen toivo, että he
kerran saavat levätä heidän vieressänsä.
Asia ei ole niin tärkeä, että senvuoksi kannattaisi vaivautua

oikeudenkäyntiin, vastasi Charlotta. Toimenpiteeni kaduttaa minua
niin vähän, että korvaan mielelläni kirkolle mitä se menettää.
Tunnustan teille vilpittömästi, etteivät esittämänne perusteet ole
saaneet minua vakuutetuksi. Lopullisen ja yleisen, ainakin kuoleman
jälkeen vallitsevan yhdenvertaisuuden puhdas tunne näyttää minusta
rauhoittavammalta kuin tuo persoonallisuuksiemme, kiintymystemme
ja elämänsuhteittemme itsepintaisen jäykkä pitkittäminen. Entä mitä
te arvelette? kääntyi hän kysymään arkkitehdiltä.
En tahtoisi tällaisessa asiassa kiistellä enkä pyrkiä sitä

ratkaisemaan, vastasi puhuteltu. Sallinette minun vaatimattomasti
lausua, mikä on lähinnä taidettani ja ajatustapaani. Koska emme
enää ole niin onnelliset, että voisimme painaa rakastetun olennon
jäännöksiä sisältävää uurnaa poveamme vasten, koska emme ole
kyllin rikkaat emmekä hilpeät säilyttääksemme niitä
vahingoittumattomina suurissa, koristelluissa sarkofageissa, koska
emme löydä enää kirkoistakaan sijaa itsellemme ja omaisillemme,
vaan joudumme taivasalle, on meillä täysi syy hyväksyä se
menettely, jonka te, armollinen rouva, olette pannut alulle. Kun
seurakunnan jäsenet lepäävät rivitysten toistensa vieressä, niin he
lepäävät toistensa luona ja joukossa, ja jos maan kerran tulee
meidät poveensa kätkeä, en tiedä mikä olisi luonnollisempaa ja
puhtaampaa kuin että sattumalta syntyneet, vähitellen luhistuneet
kummut jätetään aitaamatta ja tasoitetaan, joten yhteinen peite
kaikkien kantamana tulee jokaiselle kevyemmäksi.
Pitäisikö siis kaiken häipyä jättämättä minkäänlaista merkkiä,

mitään, mikä tulisi muistimme avuksi? kysyi Ottilia.
Eipä suinkaan! jatkoi arkkitehti. Ei ole luovuttava muistomerkistä,

vaan yksinomaan määrätystä paikasta. Rakennustaiteen
harjoittajalle ja kuvanveistäjälle on erittäin tärkeätä, että ihminen
odottaa heiltä, heidän taiteeltansa, heidän kädestänsä jatkoa
olemassaolollensa. Siksipä suosinkin hyvin suunniteltuja ja hyvin
suoritettuja muistomerkkejä, ei sinne tänne yksitellen siroteltuina,
vaan pystytettyinä yhteen paikkaan, missä niillä on säilymisen
toiveita. Koska hurskaat ja ylhäisetkin henkilöt luopuvat
etuoikeudestansa saada levätä kirkkojen mullassa, niin asetettakoon
ainakin sinne tai kauniisiin hautausmaata ympäröiviin pylväskäytäviin
muistomerkkejä ja muistokirjoituksia. Niitä varten on olemassa
lukemattomia muotoja, lukemattomia koristeita.
Jos taiteilijat ovat niin rikkaat, virkkoi Charlotta, niin sanokaahan

minulle: miksi ei päästä koskaan mitätöntä obeliskia, katkaistua
pylvästä tai tuhkauurnaa kauemmaksi? Niiden lukemattomien
keksintöjen sijassa, joista te ylpeilette, olen aina nähnyt vain
lukemattomia toistumia.
Niin lienee laita meillä, vastasi arkkitehti, mutta ei kaikkialla.
Yleensäkin on keksiminen ja sovelias käyttäminen hankala asia.
Varsinkin tässä tapauksessa on sangen vaikea luoda vakavaan
esineeseen hilpeyttä ja välttää ilottomissa synkkyyteen joutumista.
Olen kerännyt suuren joukon kaikenlaisten muistomerkkien
luonnoksia ja näytän ne joskus, mutta ihmisen kaunein muistomerkki
on aina hänen oma kuvansa. Se antaa paremmin kuin mikään muu
käsityksen siitä, mikä hän on ollut; se on paras teksti moniin tai
harvoihin säveliin, mutta se olisi tehtävä hänen parhaana aikanansa,
mikä tavallisesti laiminlyödään. Kukaan ei ajattele elävien muotojen
säilyttämistä, ja jos se tapahtuu, niin se tapahtuu riittämättömästi.
Niinpä ei olekaan muuta neuvoa kuin ottaa nopeasti kuolinnaamio,
jota taiteilija ylen harvoin kykenee täysin uudelleen elävöittämään.
Te olette, kenties tietämättänne ja tahtomattanne, ohjannut

keskustelun aivan minun edukseni, virkkoi Charlotta. Onhan ihmisen
kuva riippumaton; missä ikänä se lieneekään, aina se on olemassa
sinänsä, itsenäisenä, ja me emme suinkaan vaadi, että sen on
osoitettava varsinaista hautauspaikkaa. Mutta ilmaisisinko teille
erään omituisen tunnon? Kuvatkin ovat minulle tavallaan
vastenmielisiä, sillä niistä tuntuu aina uhoavan jonkinlaista moitetta:
ne viittaavat johonkin etäiseen, olleeseen ja menneeseen ja
muistuttavat minulle, kuinka vaikeata on oikein kunnioittaa
nykyisyyttä. Jos ajattelemme, kuinka paljon ihmisiä olemme nähneet,
tunteneet, ja tunnustamme, kuinka vähän me olemme merkinneet
heille, he meille, niin miten onkaan mielemme! Me kohtaamme
henkevän ihmisen keskustelematta hänen kanssansa, oppineen
häneltä oppimatta, paljon matkustaneen hankkimatta itsellemme
lisää tietoja, hellämielisen osoittamatta hänelle yhtään
ystävällisyyttä.
Pahempi vielä, ettei niin käy ainoastaan ohimennen tavattujen
vieraiden. Yhteisöt ja perheet kohtelevat siten rakkaimpia
jäseniänsä, kaupungit arvokkaimpia porvareitansa, kansat
oivallisimpia ruhtinaitansa, kansakunnat etevimpiä ihmisiänsä.
Kuulin kysyttävän, miksi kuolleista aina puhutaan häikäilemättä

hyvää, elävistä aina jotenkin varoen. Vastattiin: koska meidän ei
tarvitse edellisiä mitenkään pelätä, mutta jälkimmäiset voivat vielä
jossakin joutua tiellemme. Niin epäpuhdasta on toisten muistoon
kohdistuva huoli; se on enimmälti itsekästä pilaa, kun sitävastoin olisi
pyhä ja vakaa velvollisuus pitää suhteensa elossaoleviin yhä virkeinä
ja tehoisina.
TOINEN LUKU.
Edellä kuvaillun kohtauksen ja siihen liittyneen keskustelun

kiihdyttäminä lähdettiin seuraavana päivänä hautausmaalle, jonka
kaunistamiseksi arkkitehti esitti useita onnistuneita ehdotuksia. Mutta
hänen mielenkiintonsa ulottui vielä kirkkoonkin, rakennukseen, joka
oli alunpitäen herättänyt hänen huomiotansa.
Kirkko oli monen sadan vuoden ikäinen, saksalaisen tavan ja

taiteen mukaan rakennettu, sopusuhtainen ja sievästi koristettu. Oli
helppo havaita, että erään läheisen luostarin rakentaja oli tässä
pienemmässäkin rakennuksessa osoittanut hyvää taitoansa ja
taipumustansa: se vaikutti yhä vielä vakaan miellyttävästi katselijaan,
vaikka sisustuksen uudistaminen protestanttisen jumalanpalveluksen
vaatimusten mukaiseksi olikin hieman vähentänyt sen rauhaa ja
majesteettiutta.
Arkkitehti sai helposti pyydetyksi Charlottalta kohtalaisen

rahasumman, jonka nojalla aikoi korjata kirkon sekä ulkoa että
sisältä vanhaan tyyliin ja saattaa sen sopusointuun edustalla olevan
ylösnousemuksenkentän kanssa. Hän oli itse sangen kätevä, ja
muutamat työmiehet, jotka vielä askartelivat talon rakentamisessa,
tahdottiin pidättää siksi, kunnes tämä hurskas työkin saataisiin
päätökseen.
Nyt oli tilaisuutta tarkastella rakennusta itseänsä koko

ympäristöinensä ja kaikkine lisärakennuksinensa, ja arkkitehti
hämmästyi ja ilahtui kovin löytäessään pienen, piiloutuvan
sivukappelin, jonka mittasuhteet olivat vieläkin henkevämmät ja
keveämmät, koristeet vieläkin miellyttävämmät ja uutterammat. Se
sisälsi myös useita puuleikkauksia ja maalauksia, jäännöksiä tuosta
aikaisemmasta jumalanpalveluksesta, joka osasi monin kuvin ja
välinein merkitä eri juhlia ja viettää kutakin omalla tavallansa.
Arkkitehti ei voinut jättää tätä kappelia suunnitelmaansa liittämättä;

hän tahtoi korjata erikoisesti tämän ahtaan suojan entisten aikojen ja
niiden maun muistomerkiksi. Hän oli jo ajatellut, kuinka kuvioisi tyhjät
seinäpinnat mielensä mukaan, ja iloitsi siitä, että saisi harjoittaa
maalauksellisia kykyjänsä. Toistaiseksi hän kumminkin salasi koko
asian talonväeltä.
Lupauksensa mukaisesti hän näytti naisille ensinnä erilaisia

vanhojen hautapatsaiden, säiliöiden ja muiden asiaankuuluvien
esineiden kuvia ja luonnoksia, ja kun keskusteltaessa johduttiin
puhumaan pohjoismaisten kansojen yksinkertaisemmista
hautakummuista, toi hän nähtäväksi kokoelmansa monenlaisia
aseita ja kojeita, joita oli niistä löydetty. Hän oli somasti sijoittanut
nämä vakaat vanhat esineet laatikkoihin ja osastoihin pykälöityjen,
verkapäällysteisten sälöjen varaan, joten niihin hänen
käsitteleminänsä tuli jonkinlaisten koruesineiden leimaa ja niitä
silmäili mielellänsä kuin muotikauppiaan pikku laatikoita.
Intouduttuansa näyttelemään ja yksinäisen elämän vaatiessa
hauskutusta hän tapasi joka ilta tuoda nähtäviin osan aarteistansa.
Ne olivat enimmälti saksalaista alkuperää: brakteaatteja, kolikoita,
sinettejä ja muuta samantapaista. Kaikki nämä esineet suuntasivat
mielikuvituksen kohti menneitä aikoja, ja kun arkkitehti vihdoin
somisti keskusteluansa kirjapainotaidon ensimmäisillä tuotteilla,
puupiirroksilla ja vanhimmilla vaskipiirroksilla kirkon samalla aikaa
väreinensä ja muine koristeinensa alinomaa ikäänkuin kasvaessa
kohti menneisyyttä, niin melkeinpä täytyi kysyä itseltänsä, elikö
tosiaankin uudessa ajassa, eikö ollut pelkkää unta, että nyt vallitsivat
aivan toiset elämäntavat ja -tottumukset.
Tällaisen valmistelun jälkeen hänen viimeksi tuomansa salkku

vaikutti mitä parhaimmin. Se tosin sisälsi enimmälti vain
hahmoteltuja kuvia, jotka kuitenkin, suoraan alkuperäisistä
jäljennettyinä, olivat täysin säilyttäneet vanhanaikaisen sävynsä siten
erinomaisesti viehättäen katselijoita. Kaikista hahmoista kuvastui
vain puhtain elämä, kaikkia niitä täytyi pitää jaloina tai ainakin
hyvinä. Kaikissa kasvoissa, kaikissa eleissä ilmeni iloinen tyyneys,
altis meitä korkeamman palvottavan tunnustaminen, hiljainen
rakkauden ja odotuksen antaumus. Hiukseton vanhus,
runsaskiharainen poika, hilpeä nuorukainen, vakaa mies, seestynyt
pyhimys, liitelevä enkeli, kaikki näyttivät autuailta viattomassa
tyytymyksessä, hurskaassa odotuksessa. Jokapäiväisimmässäkin
tapahtumassa oli taivaallisen elämän hohdetta, ja
jumalanpalvelukseen kuuluva toimi näytti jokaisen olemukseen
täysin soveltuvalta.
Sellaiseen olopiiriin silmäilevät useimmat kuin kadonneeseen

kulta-aikaan, kadotettuun paratiisiin. Kenties yksin Ottilia tunsi
elävänsä kaltaistensa joukossa.
Kukapa siis olisikaan voinut vastustella, kun arkkitehti tarjoutui
maalaamaan kappelin suippokaarien väliset pinnat noiden
alkukuvien mukaisesti siten lujasti kiinnittääkseen muistonsa siihen
seutuun, missä hän oli mielellään elänyt ja toiminut. Hän puhui tästä
hieman alakuloisesti, sillä asiaintilan nojalla saattoi helposti päätellä,
ettei hänen oleskelunsa tässä moitteettomassa piirissä voisi kestää
miten kauan hyvänsä, että se kenties piankin katkeaisi.
Vaikka nämä päivät eivät olleetkaan rikkaat tapauksista, olivat ne

sentään täynnä vakavia keskustelunaiheita. Senvuoksi käytämme
tilaisuutta esittääksemme osia siitä, mitä Ottilia keskustelujen
johdosta merkitsi vihkoihinsa, ja tällöin tuntuu soveliaimmalta
siirtymäkohdalta eräs vertaus, joka pakostakin johtuu mieleemme
hänen herttaisia muistiinpanojansa selaillessa.
Kerrotaan eräästä erikoisesta järjestelystä Englannin laivastossa:

sen koko köysivarasto, vahvimmista lajeista heikompiin saakka, on
punottu siten, että sen läpi kulkee punainen lanka, jota ei voi
kirvoitella irti hajoittamatta koko köyttä ja josta pienimmänkin
kappaleen tuntee kruunun omaisuudeksi.
Samoin kulkee Ottilian päiväkirjan läpi kiintymyksen lanka, joka

yhdistää kaikkea ja on kaikkien osien yhteisenä merkkinä. Sen
nojalla ilmenevät nämä huomautukset, tutkistelut, suppeat
mietelauselmat ja muut sentapaiset kirjoittajallensa erikoisen
ominaisina ja merkittävinä. Jokainen valitsemamme ja tässä
esittämämme yksityiskohtakin kelpaa mitä ehdottomimmin sitä
todistamaan.
Ottilian päiväkirjasta.
"Ajatellessansa joskus kuolemaa kauemmaksi ihminen ei voi
kuvitella mitään miellyttävämpää kuin saada kerran levätä niiden
vieressä, joita rakastaa. 'Tulla kootuksi omiensa luo' on sydämellinen
lauseparsi."
"On olemassa monenlaisia muistomerkkejä, jotka tuovat etäisiä ja

kadonneita meitä lähemmäksi. Mikään niistä ei ole kuvan veroinen.
Seurustelu rakastetun kuvan kanssa, olkoonpa, ettei se ole
näköinenkään, on tavallansa viehättävää, niinkuin on toisinaan
tavallansa viehättävää kiistellä ystävän kanssa. On miellyttävä tunne
siitä, että ollaan kaksin voimatta kumminkaan toisistansa erota."
"Toisinaan seurustelemme läsnäolevan henkilön kanssa ikäänkuin

kuvan kanssa. Hänen ei tarvitse puhua, ei katsoa meihin, ei meistä
välittää: me näemme hänet, tunnemme suhteemme häneen,
voivatpa suhteemme kehittyäkin hänen tekemättä mitään sen
hyväksi, mitenkään havaitsematta, että hän suhtautuu meihin vain
kuvan tavoin."
"Tuttaviemme henkilöiden kuvat eivät koskaan meitä tyydytä.

Senvuoksi olen aina surkutellut muotokuvainmaalaajia. Ihmisiltä
vaaditaan harvoin mahdotonta, mutta juuri heiltä sitä vaaditaan.
Heidän on sisällytettävä kuvaan jokaisen suhtautuminen
kuvattavaan, jokaisen myötä- ja vastatunteet; heidän ei ole
ainoastaan kuvattava ihmistä sellaisena kuin he itse hänet käsittävät,
heidän tulee esittää kaikkia mahdollisia käsityksiä. Minua ei
ihmetytä, jos sellaiset taiteilijat vähitellen paatuvat, muuttuvat
välinpitämättömiksi ja itsepintaisiksi. Siitä saisi johtua mitä tahansa,
kunhan emme juuri senvuoksi jäisi vaille monen rakkaan ja kalliin
ihmisen kuvaa."
"Arkkitehdin kokoelma aseita ja vanhoja esineitä, jotka ruumiin
keralla ovat piilleet korkeiden multakumpujen ja kallionkappaleiden
alla, kieltämättä todistaa meille, kuinka turhaa ihmisen on huolehtia
persoonallisuutensa säilymisestä kuoleman jälkeen. Mutta kuinka
ristiriitainen onkaan ihminen! Arkkitehti tunnustaa itse avanneensa
sellaisia esivanhempien hautakumpuja, ja siitä huolimatta häntä yhä
askarruttavat jälkeentulevaisten muistomerkit."
"Mutta miksi suhtautuisimmekaan asiaan niin ankarasti?

Teemmekö kaikki, mitä teemme, iäisyyttä varten? Emmekö pukeudu
aamulla riisuutuaksemme jälleen illalla? Emmekö matkusta pois
palataksemme jälleen? Ja miksi emme tahtoisi levätä omaistemme
rinnalla, vaikkapa vain sata vuotta?"
"Kun näkee monet vajonneet, kirkossakävijäin askelten kuluttamat

hautakivet, omien muistomerkkiensä peitteeksi sortuneet kirkot, niin
elämä kuoleman jälkeen voi näyttää vain toiselta elämältä, johon nyt
astutaan kuvassa, päällekirjoituksessa, ja jossa viivytään kauemmin
kuin varsinaisessa elettävässä elämässä. Mutta tämä kuva, tämä
toinen olemassaolo sammuu sekin ennemmin tai myöhemmin.
Muistomerkkeihin samoinkuin ihmisiinkin nähden puolustaa aika
voitokkaasti oikeuksiansa."
KOLMAS LUKU.
On niin miellyttävää toimitella sellaista, mitä osaa vain puolittain,

ettei kenenkään pitäisi soimata harrastelijaa, kun hän harjoittelee
taidetta, jota ei milloinkaan opi, eikä moittia taiteilijaa, jos hän tuntee
halua siirtyä oman taiteensa piiristä jollekin läheiselle alueelle.
Tällaiselta suvaitsevaiselta näkökannalta tarkastelemme

arkkitehdin seinämaalaussuunnitelmia. Värit olivat valmiina, pinnat
mitatut, alkupiirrokset suoritetut; hän oli luopunut kaikista
keksintävaatielmista ja noudatteli ääriviivaiskuvioitansa: hänen
ainoana huolenansa oli istuvien ja leijailevien hahmojen taitava
sijoittaminen, pintojen aistikas koristaminen niiden avulla.
Telineet olivat paikoillansa, työ edistyi, ja kun jotakin

silmiinpistävää jo oli olemassa, ei arkkitehdilla voinut olla mitään sitä
vastaan, että Charlotta kävi Ottilian keralla hänen työmaallansa.
Enkelien eloisat kasvot ja hulmuavat puvut sinisellä taivaanpohjalla
ilahduttivat katsojaa, niiden hiljainen, hurskas olemus kehoitti mieltä
keräytymään itseensä ja sai aikaan erittäin herkän vaikutuksen.
Naiset olivat nousseet arkkitehdin luo telineille, ja Ottilia tuskin

huomasi, kuinka säntillisen keveästi ja mukavasti kaikki tapahtui, kun
hänessä yht'äkkiä tuntui kehkiävän ilmi se, mitä hän oli aikaisemmin
oppinut: hän tarttui väreihin ja siveltimeen ja maalasi saamansa
ohjeen mukaan siististi ja taitavasti runsaslaskoksisen puvun.
Charlotta, joka mielellänsä näki Ottilian jollakin tavoin askartelevan

ja itseänsä huvittavan, poistui heidän luotansa antautuakseen omiin
ajatuksiinsa, pohtiakseen itseksensä mietteitä ja murheita, joita hän
ei voinut kenellekään ilmaista.
Jos tavalliset ihmiset, joita jokapäiväisen elämän pulmat

kiihdyttävät kiihkeän hätäilevään käyttäytymiseen, pakottavat meidät
säälien hymyilemään, niin suhtaudumme sitävastoin kunnioittavasti
sellaiseen mieleen, joka on vastaanottanut suuren kohtalon kylvön,
jonka on odotettava tämän siemenensä kehkeytymistä saamatta ja
voimatta kiirehtää siitä johtuvaa hyvää tai pahaa, onnea tai
onnettomuutta.
Eduard oli jättänyt Charlottan hänen luoksensa yksinäisyyteen

lähettämälle sananviejälle vastauksen, ystävällisen ja osaaottavan,
mutta kuitenkin pikemmin tyynen ja vakavan kuin hellän ja
tutunomaisen. Pian senjälkeen Eduard oli kadonnut, eikä hänen
vaimonsa onnistunut saada hänestä mitään tietoja, ennenkuin
sattumalta löysi hänen nimensä sanomalehdestä, missä se oli
kiittäen mainittu niiden joukossa, jotka olivat kunnostautuneet
eräässä merkittävässä sotatapahtumassa. Charlotta tiesi nyt, mille
tielle Eduard oli lähtenyt, sai kuulla hänen pelastuneen suurista
vaaroista, mutta oli samalla varma siitä, että hän tulisi etsimään vielä
suurempia, ja voi liiankin hyvin arvata, että häntä tuskin kävi
pidättäminen äärimmäisistä askelista. Charlotta kantoi näitä murheita
alinomaa ajatuksissansa, ja miten hän niitä käsittelikin, mikään
näkökanta ei voinut suoda hänelle lepoa.
Ottilia, joka ei aavistanut mitään tuosta kaikesta, oli sillävälin kovin
kiintynyt uuteen työhön ja saanut varsin helposti Charlottalta luvan
sen säännölliseen jatkamiseen. Nyt se edistyi nopeasti: sininen
taivas oli pian kansoitettu arvokkailla asujaimilla. Jatkuvan
harjoituksen nojalla Ottilia ja arkkitehti kykenivät maalaamaan
viimeiset kuvat vapaammin; ne onnistuivat silminnähtävästi
paremmin. Myöskin kasvoissa, joiden kuvaaminen oli yksin
arkkitehdin asiana, ilmeni vähitellen eräs aivan erikoinen
ominaisuus: ne alkoivat kaikki olla Ottilian näköisiä. Kauniin tytön
kasvot vaikuttivat varmaan nuoreen mieheen, joka ei ollut ennakolta
omaksunut kuvattavikseen mitään luonnon tai taiteen tarjoamia
kasvojenpiirteitä, niin voimakkaasti, ettei häneltä sitten, silmän ja
käden välimaalla, mitään hävinnyt, vaan molemmat vihdoin
työskentelivät täysin sopusointuisesti. Miten hyvänsä: eräät
viimeisistä kasvoista onnistuivat niin täydellisesti, että näytti siltä,
kuin Ottilia itse olisi silmäillyt alas taivaan korkeuksista. Holvi oli nyt
valmis; seinät oli päätetty jättää kuvioimatta ja peittää vain
heleämmällä ruskealla värillä; hoikkien pylväiden ja veistettyjen
koristeiden piti tummemmiksi maalattuina siitä erota. Mutta
tällaisissa asioissa johtuu aina toinen seikka toisesta, ja niin
päätettiin vielä maalata kukkia ja hedelmäkiehkuroita, joiden piti
tavallansa liittää yhteen taivas ja maa. Nyt oli Ottilia aivan omalla
alallansa. Puutarhat tarjosivat mitä kauneimpia esikuvia, ja vaikka
seppeleet maalattiinkin sangen rehevät, saatiin ne kuitenkin valmiiksi
lyhyemmässä ajassa kuin alkujaan suunniteltiin.
Kaikki näytti yhä vielä hoidottomalta ja valmistumattomalta.

Telineet oli työnnetty sekaisin, lautoja heitelty ristiin rastiin;
epätasaista permantoa rumensivat vielä monet väriläikät. Arkkitehti
pyysi nyt naisia myöntämään hänelle aikaa viikon verran ja olemaan
niin kauan kappelissa käymättä. Vihdoin, eräänä kauniina
ehtoohetkenä, hän kehoitti heitä sinne lähtemään, mutta pyysi
samalla saada olla heitä saattamatta ja jätti heidät kohta hyvästi.
Millaisen yllätyksen hän lieneekin meille suunnitellut, virkkoi

Charlotta hänen poistuttuansa, ei minulla kumminkaan ole ollenkaan
halua lähteä kappeliin. Ottanet sen yksin tehdäksesi ja kertonet
minulle. Hän on varmaan saanut aikaan jotakin miellyttävää. Minä
nautin siitä ensin sinun kuvailemanasi ja myöhemmin mielelläni
todellisuudessa.
Ottilia, joka hyvin tiesi Charlottan monissa asioissa käyttäytyvän

varovasti, karttavan kaikkia mielenliikutuksia ja varsinkin yllätyksiä,
lähti kohta yksin matkaan katsahtaen tahtomattaan ympärillensä,
keksiäkseen arkkitehdin, jota kumminkaan ei missään näkynyt,
koska hän todennäköisesti oli piiloutunut. Ottilia astui kirkkoon, jonka
ovi oli avoinna. Kirkko oli jo aikaisemmin saatu kuntoon, puhdistettu
ja vihitty. Hän astui kappelin ovelle, jonka raskas, raudoitettu taakka
keveästi aukeni, ja hän seisoi hämmästyksekseen tutussa suojassa,
joka tarjosi odottamattoman näyn.
Ainoasta korkeasta ikkunasta virtasi sisään monivärinen valo: se

näet oli somasti liitetty kokoon erivärisistä laseista. Koko suoja sai
siten uuden sävyn ja herätteli omituista tunnelmaa. Holvien ja
seimen kauneutta korosti siro permanto; se oli rakennettu
erikoismuotoisista, kauniin mallin mukaan lasketuista ja valetun
kipsipinnan toisiinsa yhdistämistä tiilikivistä, jotka arkkitehti oli salaa
valmistuttanut, samoinkuin värilliset ruudutkin, voiden ne nyt
lyhyessä ajassa liittää yhteen. Istuimistakin oli pidetty huolta.
Kirkollisten muinaisesineiden joukosta oli löytynyt muutamia kauniilla
puuleikkauksilla koristettuja kuorituoleja, jotka nyt seisoivat
seinämällä varsin sirossa järjestyksessä.
Ottiliaa ilahduttivat tutut, hänelle tuntemattomana kokonaisuutena
esiintyvät osat. Hän seisoi, asteli edestakaisin, katsoi ja katseli;
vihdoin hän istuutui erääseen tuoliin, ja kun hän siinä silmäili
ympärillensä, tuntui siltä, kuin hän olisi ollut eikä olisi ollut, kuin hän
olisi tuntenut eikä olisi tuntenut, kuin kaikki tuo nähty, vieläpä hän
itsekin olisi häipymässä olemattomiin. Vasta kun aurinko väistyi
siihen saakka kirkkaasti valaistusta ikkunasta, Ottilia havahtui
entisellensä ja riensi linnaan.
Hän ei salannut itseltänsä, että tämä yllätys oli sattunut sangen

omituiseen aikaan: oli Eduardin syntymäpäivän edellinen ilta. Hän oli
tosin toivonut voivansa viettää juhlaa aivan toisin: kuinkapa ei olisi
kaiken pitänyt olla koristettuna sitä varten? Mutta nyt olikin syksyn
runsas kukkassato poimimatta. Päivännoudot kohottivat yhä
kasvojansa kohti aurinkoa, asterit tuijottelivat yhtä vaatimattomina
eteensä, ja mitä niistä oli seppeleiksi sidottu, oli ollut mallina
koristeltaessa suojaa, joka näytti soveltuvan ainoastaan yhteiseksi
hautakammioksi, jos sen piti tulla jotenkin käytetyksi eikä jäädä
pelkäksi taiteilijan päähänpistoksi.
Ottilian mieleen johtui pakostakin Eduardin hänelle järjestämä

meluisa ja touhuinen syntymäpäiväjuhla, hänen mieleensä johtui
uusi rakennus, jonka katon alla uskottiin monen ilon odottavan.
Ilotulituskin säihkyi ja räiskyi jälleen hänen nähtävissään ja
kuultavissaan; mitä yksinäisempi hän oli, sitä väkevämmin leimusi
mielikuvitus, mutta sitä yksinäisemmäksi hän samalla tunsi itsensä.
Hän ei nojannut enää Eduardin käsivarteen eikä voinut toivoa
saavansa hänestä enää koskaan tukea.
Ottilian päiväkirjasta.
"Eräs nuoren taiteilijan huomautus minun on merkittävä muistiin:
samoinkuin käsityöläisessä voi kuvaamataiteilijassakin mitä
selvimmin havaita, että ihminen voi kaikkein vähimmin omaksua
itsellensä sitä, mikä hänelle aivan erityisesti kuuluu. Hänen
teoksensa karkaavat häneltä kuin linnut pesästä, jossa ovat
syntyneet päivän valkeuteen.”
"Varsinkin rakennustaiteilijan kohtalo on tässä suhteessa

merkillinen. Kuinka usein hän käyttelee koko nerokkuuttansa ja
taitoansa luodakseen suojia, joista hänen itsensä on pysyteltävä
poissa. Hänelle ovat velkaa komeutensa kuninkaan salit, joiden
parasta vaikutusta hän ei pääse näkemään eikä nauttimaan.
Temppeleissä hän piirtää rajan erottamaan itseänsä
kaikkeinpyhimmästä: hän ei saa enää astua niille porrasaskelmille,
jotka on rakentanut sydäntäkohottavan juhlallisiksi, kuten kultaseppä
vain kaukaa palvoen katselee monstranssia, jonka lasitteen ja
jalokivet hän on järjestänyt sijoillensa. Ojentaessaan rikkaalle hänen
uuden palatsinsa avaimet rakentaja samalla luovuttaa hänelle kaiken
mukavuuden ja hyvinvoinnin pääsemättä itse siitä mitenkään
osalliseksi. Eikö taide siten välttämättä etäänny taiteilijasta, jos teos,
kuin kapioinensa kotoa lähtevä lapsi, ei enää vaikuta takaisin
isäänsä? Ja kuinka edullista olikaan taiteelle itsellensä, kun sen
tehtävänä oli askarrella melkein yksinomaisesti julkisissa tehtävissä,
sellaisissa, joiden tulos kuului kaikille, niinmuodoin taiteilijallekin!"
"Eräs vanhojen kansojen käsitys on vakava ja voi tuntua

peloittavaltakin. Ne otaksuivat esivanhempiensa istuvan suurissa
luolissa valtaistuimillaan, kehässä, ääneti vaihtaen ajatuksiansa. Jos
uusi tulokas oli heistä kyllin arvokas, he nousivat seisomaan ja
tervehtivät häntä päätänsä nyökähdyttäen. Eilen, kun istuin
kappelissa ja näin tuolini ympärillä useita toisia, tuo ajatus tuntui
minusta sangen miellyttävältä. Miksi et voi jäädä istumaan, mietin
itsekseni, hiljaa ja itseesi keräytyneenä istumaan, kauan, kauan,
kunnes vihdoin saapuvat ystävät, sinä nouset ja ystävällisesti
nyökäten osoitat heille heidän sijansa. Värilliset ruudut muuttavat
päivän vakaaksi hämäräksi, ja jonkun pitäisi lahjoittaa ikuinen
lamppu, jotta yökään ei olisi ylen synkeä."
"Mitä tehnemmekin, aina ajattelemme itsemme näkeviksi. Minä

uskon ihmisen uneksivan vain sen vuoksi, ettei lakkaisi näkemästä.
Voisipa käydä niin, että sisäinen valo kerran kirpoaisi meistä ulos,
niin ettemme mitään muuta valoa enää tarvitsisi."
"Vuosi soittaa viimeisiä säveliänsä. Tuuli kiitää yli sänkipellon

löytämättä enää mitään liikutettavaa; vain noiden hoikkien puiden
punamarjat näyttävät vielä tahtovan johdattaa mieleemme jotakin
hilpeätä, samoinkuin puimamiehen varstan tasatahtiset iskut
herättävät meissä sen ajatuksen, että sirpin leikkaamassa tähkässä
piilee paljon ravitsevaa ja elävää."
NELJÄS LUKU.
Kuinka oudosti täytyikään sellaisten tapausten, tuon pakostakin

mieleen tunkeutuneen katoavaisuuden ja kuolemantunnon jälkeen
Ottiliaan vaikuttaa sen tiedon, jota häneltä ei käynyt kauemmin
salaaminen, nimittäin että Eduard oli lähtenyt kokemaan vaihtelevaa
sotaonnea. Häneltä ei jäänyt havaitsematta yksikään niistä seikoista,
jotka hänellä oli syy ottaa huomioon. Onneksi ihminen kykenee
tajuamaan onnettomuutta ainoastaan osittain; suurempi määrä hänet
joko tuhoaa tai jättää välinpitämättömäksi. On olemassa tilanteita,
joissa pelko ja toivo yhtyvät, kumoavat toisensa ja raukeavat
hämäräksi tunteettomuudeksi. Kuinka voisimmekaan muuten tietää
kaukana viipyvien rakkaimpiemme olevan alinomaisessa vaarassa ja
siitä huolimatta yhä jatkaa tavanomaista elämäämme.
Tuntuipa senvuoksi siltä, kuin olisi jokin hyvä henki pitänyt

Ottiliasta huolta tuomalla yht'äkkiä tähän hiljaisuuteen, johon hän
yksimielisenä ja toimettomana tuntui vajoavan, hurjan sotalauman,
joka asetti hänelle riittävästi ulkoapäin tulevia vaatimuksia ja pakotti
hänet urkenemaan omasta itsestänsä samalla elähdyttäen hänen
omia voimiansa.
Charlottan tytär, Luciana, oli tuskin ehtinyt siirtyä koulukodista
suureen maailmaan, oli tuskin ehtinyt nähdä tätinsä talossa kirjavan
seuran parveilevan ympärillänsä, kun hänen miellyttämishalunsa jo
todellakin herätti mieltymystä ja eräs nuori, erittäin varakas mies
tunsi kiivasta halua saada hänet omaksensa. Hänen melkoinen
omaisuutensa oikeutti hänet aina vaatimaan omaksensa kaikkein
parasta, ja häneltä ei näyttänyt puuttuvan mitään muuta kuin kaikin
puolin moitteeton puoliso, jota maailma kadehtisi samoinkuin kaikkea
muutakin.
Tämä perheasia se toistaiseksi kovin askarrutti Charlottaa; hän

harkitsi sitä parhaansa mukaan ja omisti sille koko kirjeenvaihtonsa,
mikäli sen tarkoituksena ei ollut lähempien tietojen saaminen
Eduardista. Niinpä olikin Ottilia jäänyt viime aikoina entistä
yksinäisemmäksi. Hän tosin tiesi Lucianan tulevan ja oli suorittanut
talossa asian vaatimat valmistelut, mutta niin pian ei vierailun
otaksuttu tapahtuvan. Tahdottiin vielä ennakolta kirjoittaa, sopia,
tarkemmin määrätä, kun myrsky yht'äkkiä yllätti linnan ja Ottilian.
Vaunut toivat kamarineitejä ja palvelijoita, matkalaukkuja ja -

kirstuja kantamuksittain; näytti jo siltä, kuin vierailisi talossa pari
kolme herrasväkeä. Mutta nytpä vasta ilmestyivät vieraat itse: täti
Lucianan ja muutamien hänen ystävättäriensä keralla ja sulhanen,
hänkään ei yksinänsä. Eteinen oli täynnä nahkaisia matkakirstuja,
laukkuja ja muita säiliöitä. Suurella vaivalla erotettiin monet lippaat ja
kotelot toisistansa. Tavaroiden kuljettamisesta ja sijoittamisesta ei
tahtonut tulla loppua. Sattui vielä rankkasade, joka aiheutti paljon
hankaluutta. Ottilia suhtautui tähän rajuun hyörinään tyynen
toimeliaasti, esiintyipä hänen iloinen taidokkuutensa kauneimmassa
loistossaan: hän näet sijoitti ja järjesti kaikki lyhyessä ajassa. Kaikki
olivat sijoitetut, kaikki omalla tavallansa mukavasti, ja uskoivat

744 (Download PDF) Intermediate Accounting Volume 1 Canadian 7th Edition Beechy Test Bank Full Chapter

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

744 (Download PDF) Intermediate Accounting Volume 1 Canadian 7th Edition Beechy Test Bank Full Chapter

Uploaded by

Copyright:

Available Formats

Intermediate Accounting Volume 1

Canadian 7th Edition Beechy Test Bank

Intermediate Accounting Volume 1 Canadian 7th Edition

Intermediate Accounting Volume 1 7th Edition Beechy

Intermediate Accounting Volume 1 5th Edition Beechy

Intermediate Accounting Volume 2 Canadian 7th Edition

Intermediate Accounting Volume 1 5th Edition Beechy

Intermediate Accounting Volume 2 Canadian 7th Edition

Intermediate Accounting Volume 2 7th Edition Beechy

Intermediate Accounting Volume 2 7th Edition Beechy

3. Generally, expenses incurred to generate revenues should be matched to the revenues

4. The percentage-of-completion method of accounting for long-term construction projects is

25. "Billings on contracts" is a contra account to "Accounts Receivable."

55. Revenues must always be recognized at a single point in time.

64. The completed-contract method of revenue recognition recognizes revenue on a long-term

70. Non-monetary transactions by definition involve no exchange of cash.

73. Which of the following would not be considered a multiple-deliverable arrangement?

A. The seller's fulfillment of its responsibility in the transaction

A. Receipt of cash by the seller at the time of sale.

76. In accounting, the term "revenue recognition" refers to:

A. Measuring the expense related to the revenue for a specific period.

A. The terms of payment in the contract.

A. They recognize different amounts of income for the construction period.

82. The percentage-of-completion method of accounting for long-term construction projects is

A. Understates cost of goods sold.

A. Cost recovery method

A. Appear only on the income statement during the period of construction.

86. Why is construction-in-progress increased by the annual recognized profit on long-term

A. Because the contract price has increased.

A. Under completed contract, the balance equals cost plus billings.

A. May require that inter-period tax allocation procedures be used.

A. The same amount of income in the year of completion.

A. The balance in the "Construction-in-Progress" account is reported on the balance sheet as a

92. Under the percentage-of-completion method of income recognition on long-term construction

A. No income amount is closed each period to income summary.

A. Record a $200,000 gain on the sale of land.

A. $5,000 at sales price has not been collected

A. Cost recovery method.

96. Grocery stores recognize most of their revenue based on the:

A. Cost recovery method.

A. Sales method applied to sales of a department store

98. Revenue is recognized prior to the time of sale under the:

A. Specific performance method.

A. Completed performance method

2006 2007 2008

105.Under the percentage-of-completion method, a company has recognized $40,000 of profit

Total cost incurred till date = $3,000

What profit or loss is recognized in the current year?

Costs incurred = $20,000

A. Costs in excess of billings $5,000

Costs incurred to date = $20,000

Contract Price Actual Total Costs Income Previously Recognized

115.The completed contract method of accounting for long-term construction-type contracts is

Completed contract Percentage-of-completion

A. A contractor is involved in numerous projects.

A. payment was made by cheque.

A. no gain or loss on this transaction.

A. an established market with quoted prices.

A. provide no basis for the repossessed asset, thereby recognizing a loss.

Calculate the gross profit to be recognized during 2007.

125.A construction company has consistently used the percentage-of-completion method of

Record all of ABC Inc' journal entries for the month.

(a) Completed contract method?