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Intermediate Accounting Exam 2 Review with 100% Verified Answers| Verified & Updated
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Intermediate Accounting Exam 2 Review with 100% Verified Answers| Verified & Updated
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Intermediate Accounting Exam 2 Review with 100%Verified Answers| Verified & Updated
On January 1st, Guarder Consulting enters into a one-year contract with Smith Co. to restructure
some of Smith's processes with a goal of cost savings. Smith pays Guarder an up-front fixed fee
of $48,000 on January 1st. Guarder will also earn an additional $12,000 bonus if Smith achieves
$100,000 of cost savings. Guarder estimates a 70% chance that Smith will achieve $100,000 of
cost savings. What journal entry will Guarder make on January 1st to recognize the up-front cash
payment? - ✔✔Cash 48,000
Deferred revenue 48,000
At the end of the period, if construction in progress exceeds billings on construction contracts,
it is recorded as a(n)
-contract asset.
-expense.
-revenue.
-contract liability. - ✔✔-contract asset.
Adjust revenue for the previously recognized bonus
Record a valuation allowance against the bonus receivable.
For the remainder of the contract, only recognize revenue related to the fixed fee.
-Adjust revenue for the previously recognized bonus
-Record a valuation allowance against the bonus receivable.
,-For the remainder of the contract, only recognize revenue related to the fixed fee.
-Reverse the bonus receivable - ✔✔-Adjust revenue for the previously recognized
bonus -For the remainder of the contract, only recognize revenue related to the fixed fee.
-Reverse the bonus receivable
If a contract specifies prepayment before delivery, the customer is essentially making a
______________ to the seller and, therefore, is getting compensation for the time value of
money. - ✔✔Loan
Which of the following can be used as indicators of progress toward completion under the
input method? (Select all that apply.)
-number of units produced to date
-achievement of milestones
-costs incurred
-machine hours used
-labor hours expended - ✔✔-costs incurred
,-machine hours used
-labor hours expended
For a consignment sale, when is inventory reduced for the cost of the item by the consignor?
-When shipped to the consignee.
-When sold by the consignee.
-When received by the consignee.
-When the consignment agreement is signed. - ✔✔When sold by the consignee.
Under the gross method, the initial recording of sales revenue will be ______ the amount
recorded under the net method.
-equal to
-higher than
-lower than - ✔✔-higher than
Which of the following conditions or situations make the timing of revenue recognition for
long-term contracts especially critical? (Select all that apply.)
-In most cases, the project is of little value until completed.
-There tends to be a considerable difference between recognition over time and when the
performance obligation is completed.
, -Delayed recognition doesn't provide information to financial statement users in a timely manner.
- ✔✔-There tends to be a considerable difference between recognition over time and when the
performance obligation is completed.
-Delayed recognition doesn't provide information to financial statement users in a timely manner.
Failing to estimate sales returns can result in income being _______ in the period the sale is
made and _______ in the period the product is returned.
-overstated; understated
-understated; overstated
-overstated; overstated
-understated; understated - ✔✔-overstated; understated
Related to long-term construction contracts, at the end of the period which accounts are netted?
-Construction in progress and billings on construction contracts.
-Construction in progress and construction revenue.
-Billings on construction contracts and accounts receivable.
-Construction in progress and accounts receivable. - ✔✔-Construction in progress and
billings on construction contracts.
True or false: Both interest bearing and noninterest bearing notes bear interest. - ✔✔True
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