1. How should the balances of Progress Billings and Construction in Progress be shown at reporting dates prior to completion of a long-term contract
a. Progress billings as income, construciton in progress as inventory
b. Net , as income from construction if credit balance, and loss from construction if debit balance
c. Progress Billings as deferred income, Construction in Progress as a current asset
d. Net, as a current asset if debit balance and current liability if credit balance
2. The competed-contract 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 long duration
c. estimates of costs to complete and extent of progress toward completion are reasonably dependable
d. there are inherent uncertainties in the contract beyond normal business risks
3. C & J Construction has consistently used the percentage of completion method of recognizing income. Last year C & J started work on a $4,500,000 constuction contract, which was completed this year, the accounting records desclosed the following data for the last year
Progress billings - $1,650,000
Costs incurred - 1,350,000
Collections - 1,050,000
Estimated cost to complete - 2,700,000
How much income should C & J have recognized on this contract last year?
a. 105,000
b. 150,000
c. 300,000
d. 350,000
4. The use of the gross profit assumes
a. the amount of gross profit is the same as in prior years
b. sales and cost of goods sold have not changed from previous years
c. inventory values have not increased from previous years
d. the relationship between selling price and cost of goods sold is similar to prior years
5. the gross profit method of inventory valuation is not valid when
a. there is substantial increase in the quantity of inventory during the year
b. there is substantial increase in the cost of inventory during the year
c. the gross margin percentage changes significantly during the year
d. all ending inventory is destroyed by dire before it can be counted
6. When the current year's ending inventory amount is overstated,
a. the current year's cost of goods sold is overstated
b. the current year's total assets are understated
c. the current year's net income is overstated
d. the next year's income is overstated
7. If the ending inventory balance is understated, net income of the same period
a. will be overstated
b. will be understated
c. will be unaffected
d. cannot be determined from the above information
8. An overstatement of ending inventory in Period 1 would result in income of Period 2 being
a. overstated
b. understated
c. correctly stated
d. the answer cannot be determined from the information given
9. what is the maximum amount at which inventory can be valued when the goods have experienced a permanent decline in value
a. historical cost
b. sales price
c. net realizable value
d. net realizable value reduced by a normal profit margin
10. Net realizable value can be defined as
a. selling price
b. selling price less costs to complete and sell
c. selling price plus costs to complete and sell
d. acquisition cost plus costs to complete and sell
11. Miller company needs an estimate of its ending inventory balance. The following information is available
Cost Retail
sales revenue - 180,000
beginning inventory - 35,000 62,000
net purchases - 100,000 135,000
gross margin percentage - 30%
Given this information, when using the gross margin estimation method, ending inventory is approx
a. 1,000
b. 9,000
c. 19,000
d. 11,650
12. Which of the following would not be reported as inventory?
a. land acquired for resale by a real estate firm
b. stocks and bonds held for resale by a brokerage firm
c. partially completed goods held by a manufacturing company
d. machinery acquired by a manufacturing company for use in the production process
13. Cost of goods sold is equal to
a. the cost of inventory on hand at the end of a period plus net purchases minus the cost of inventory on hand at the beginning
b. the cost of inventory on hand at the beginning of a period minus net purchases plus the cost of inventory on hand at the end of a period
c. the cost of inventory on hand at the beginning of a period plus net sales minus the cost of inventory on hand at the end of a period
d. the cost of inventory on hand at the beginning of a period plus net purchases minus the cost of inventory on hand at the end of a period
14. In a period of falling prices, the use of which of the folliwng inventory cost flow methods would typically result in highest cost of goods sold?
a. FIFO
b. LIFO
c. Weighted average cost
d. Specific identification
15. In a period of rising prices, the inventory cost allocation method that tends to result in the lowest reported net income is
a. LIFO
b. FIFO
c. Moving average
d. Weighted average
16. The LIFO inventory cost flow method may be applied to which of the following inventory systems?
Periodic Perpetual
a. no no
b. no yes
c. yes yes
d. yes no