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Exam 5: Income Measurement

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Question 81

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Use the following to answer questions Missoula Inc.reported the following selected financial statement data: -Required: Compute the profit margin on sales for 2016.

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$25,000 / ...

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Question 82

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If the contract is not in writing,revenue cannot be recognized,even though goods have been transferred and payment is expected to be received in exchange.

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Question 83

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Use the following to answer questions The following partial income statement and balance sheet information (in $ millions)comes from the Annual Report of Saratoga Springs Co.for the year ending 12/31/2016: Required: Compute the following amounts for Saratoga Springs Co. -Its return on stockholders' equity for 2016.Round your answer to one decimal place,e.g. ,.1234 as 12.3%.

Use the following to answer questions McCombs Contractors received a contract to construct a mental health facility for $2,500,000.Construction was begun in 2015 and completed in 2016.Cost and other data are presented below: -Assume that McCombs recognizes revenue on this contract over time according to percentage of completion. Required: Prepare all journal entries to record costs,billings,collections,and profit recognition. Round your answers to the nearest whole dollar.

Assume that the scales,software and calibration service are viewed as one performance obligation.How much revenue will Ortiz recognize in 2016 for this contract?

Initial franchise fees are always recognized on the date they are received.

The residual approach to estimate stand-alone selling prices is often used for goods or services that are sold separately and that have stable prices.

Assume that GM signs a contract to deliver 10 buses to the Tompkins Consolidated Area Transit (TCAT),which provides transit service throughout Tompkins County,for $4 million.Under the contract,TCAT makes a cash payment of $4 million to GM,and the 10 buses are shipped immediately from GM's existing inventory.At the same time,GM obtains the right to advertise its products on all of TCAT buses for six months,and makes a cash payment of $20,000 to GM for the advertising service.The fair value of the advertising service is $18,000. Required: Prepare the journal entries GM should record to account for the sale of the buses and the purchase of the advertisements.Indicate the amount of revenue GM should recognize for its sale of buses to TCAT.

Hulkster's 2016 profit margin is (rounded) :

Assume that Sanjeev estimates variable consideration as the most likely amount.After Sanjeev has recognized revenue for two months of the contract,he changes his assessment of the chance the contract will pay him $3,000 to 70%.What adjustment to revenue should Sanjeev recognize to account for that change in estimate?

Calculate how much of the transaction price should be allocated to each performance obligation in the contract.Show your work.

A common output method used to measure progress towards completion is to determine the proportion of promised goods and services that have been transferred to date.

Assuming Brunetti determines transaction price as the "expected value" of the variable consideration,what would be the appropriate transaction price for this contract?

When accounting for multiple-element arrangements,GAAP indicates that sellers can separately record revenue for part of an arrangement even if the part does not have value to the customer on a stand-alone basis.

To account for variable consideration using the most likely amount,the probability of each possible amount is multiplied by the possible amount to get an expected contract price.

What is the journal entry in 2016 to record revenue?

Assuming BCC recognizes revenue upon project completion,what would gross profit have been in 2015 and 2016 (rounded to the nearest thousand)?

Typically,Beaumont incurs $375 on compensation and other costs to provide the private lessons,and earns an average of 40% profit over cost on service offerings.Required: Assuming that the diving equipment and the certification lessons are separate performance obligations,estimate the stand-alone selling price of the certified lessons based on the expected cost plus margin approach.

Use the following to answer questions Excerpts from Dowling Company's December 31,2016 and 2015,financial statements and key ratios are presented below (all numbers are in millions) : -Dowling's average inventory balance for 2016 is (rounded) :

Companies recognize revenue when goods or services are transferred to customers for the amount the company expects to be entitled to receive in exchange for those goods or services.