multiple choice 1 which of the following is considered in the calculation of both ne 4352238

 

MULTIPLE CHOICE

1.Which of the following is considered in the calculation of BOTH net income and operating income?

a.extraordinary loss

b.interest expense

c.cost of goods sold

d.minority interest in income

2.When preparing an income statement, cost of goods sold has been subtracted out in order to obtain which of the following?

Gross Profit     Operating Income

a.Yes                    Yes

b.Yes                    No

c.No                     Yes

d.No                      No

3.Firms should recognize the expense related to uncollectible accounts

a.during the period of sale

b.when accounts are written off

c.when customers declare bankruptcy

d.never; there is no expense related to uncollectible accounts

4.For most firms, revenue is recognized

a.at the point of cash collection

b.at completion of production

c.at the time the sale takes place

d.during production

5.When goods are sold FOB destination, title passes

a.at the destination

b.when the goods are loaded onto the truck at the seller's place of business

c.when the goods are paid for by the buyer

d.midway between the seller's and buyer's places of business

6.Revenue should be recognized on a transaction

a.at the a customer places an order

b.when the cash has been collected from the buyer

c.when the seller has earned the right to payment from the buyer

d.as soon as the seller is confident that he has a buyer for the goods under consideration

7.Revenue should ordinarily be recognized when four criteria have been met. Which of the following is NOT one of the four criteria?

a.seller has completed most of the activities necessary to produce and sell the goods or services

b.cash has been collected from the buyer

c.seller is reasonably certain the buyer will pay the cash that is due

d.seller can objectively measure the amount of revenue he/she has earned

8.Alpha Builders specializes in large construction contracts that take several years to complete. As a general rule, Alpha should recognize revenue

A little each year        As soon as the

as work progresses     contract is signed

a.Yes                         No

b.No                          No

c.Yes                         Yes

d.No                          Yes

9.The City of Gunnison awarded a $5,000,000 road-construction contract to the Fast Builders Construction Company.  Construction was expected to take three years. After one year, Fast Builders had incurred $625,000 of cost and was approximately 20% completed with the road. The company estimated that another $2,500,000 would be expended to complete the contract. The company is confident regarding its estimates. What amount of profit, if any, should Fast Builders recognize for the first year?

a.$0

b.$375,000

c.$500,000

d.$625,000

e.$1,000,000

10.Commercial Developers, Inc. was awarded a three-year contract to build a giant shopping mall complex at a price of $230 million. At the end of the first year, the company had incurred $57 million of costs and the project was about 30% completed. The firm estimated that it would take another $133 million to complete the project. What amount of profit should the firm recognize in the first year of this project in proportion to its work completed?

a.$0

b.$12,000,000

c.$17,100,000

d.$69,000,000

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