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Ex. 6-89Concessionary terms Explain what concessionary terms are, and give four examples. Ex. 6-90Definitions Provide clear, concise answers for the following: 1.Explain the conceptual difference between the earnings approach and the contract-based approach to accounting for revenues. 2.How is revenue recognized under the earnings approach? 3.How is revenue recognized under the contract-based approach? 4.How are sales accounted.
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Pr. 5-113Statement of cash flows – direct method The controller of Nebula Corporation has provided you with the following information: Nebula Corporation Income Statement For the Year Ended December 31, 2017 Net sales................................................620,000 Operating expenses........................................410,000 Income from operations.....................................210,000 Other revenues and expenses Gain on sale of equipment............................... 30,000 Interest expense.......................................8,00022,000 Income before income taxes.................................232,000 Income taxes.............................................92,800 Net income...............................................139,200 Nebula Corporation Comparative Account Information Relating to Operations For.
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Ex 6-110Performance obligations and warranties Kimbo Corporation sold 500 widgets during 2017 at a total price of $1.4 million, with a warranty guarantee that the widgets were free from any defects.The cost of widgets sold is $600,000.The term of the assurance warranty is one year, with an estimated cost of $10,000. Instructions What.
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21. “Allowance for Doubtful Accounts” is a(n) a) expense account. b) contra account. c) liability account. d) current asset. 22. Using the allowance method, when an account receivable is written off, the account to be debited is a) accounts receivable. b) bad debts expense. c) allowance for doubtful accounts. d) cash. 23. Which of the following approaches to determine bad.
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Ex. 7-82Terminology In the space provided at right, write the word or phrase that is defined or indicated. 1.The minimum balances that may have              1. ______ to be kept in chequing or savingsaccounts. 2.Cash that has been set aside for              2. ______ investment or financing purposes. 3.Receivables with underlying              3. ______ contractual rights to receive cash. 4.The reduction.
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51. All of the following are disadvantages of input measures in measuring progress toward completion of long-term contracts EXCEPT a) inefficiencies may cause the productivity relationship to change. b) front-end loading. c) units are not comparable in time, effort, or cost to complete. d) the measures are not universally applicable. 52. The principal disadvantage of.
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Ex. 6-112Consignment sale In 2017, the following transaction occurred between Senators Wholesale Corp. (consignor) and Canadiens Stores (consignee): On March 2, 2017 Senators shipped merchandise costing $52,000 to Canadiens. Senators paid $4,000 for freight and Canadiens paid $3,000 for advertising (to be reimbursed by Senators). By the end of the third quarter.
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Pr. 6-117Long-term construction project accounting Giants Construction Inc. specializes in the construction of commercial and industrial buildings. The company is experienced in bidding on long-term construction projects of this type, with the typical project lasting from fifteen to twenty-four months. Giants uses the percentage-of-completion method. Progress toward completion is measured on.
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Pr. 6-1118Accounting for long-term construction contracts The board of directors of Steelers Construction Corp. is meeting to choose between the completed-contract method and the percentage-of-completion method of accounting for long-term contracts in the company's financial statements. You have been engaged to assist Steelers’ controller in the preparation of a presentation to.
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MULTIPLE CHOICE—Conceptual 1.              When dealing with sales agreements, “acquired” means a) consideration or rights to consideration. b) goods to be delivered in the future. c) dealing at arm’s length. d) measurement of the transaction. 2.              If an entity sells on credit, the risk that the customer will not pay is called a) price risk. b) credit risk. c) commercial.
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*Ex. 5-107Interpretation of ratios For each ratio you calculated for Keefe Enterprises in exercise 5-xx explain what the ratio measures and provide a brief interpretation of the ratio you calculated for Keefe Enterprises. *Ex. 5-108Calculation of ratios               A company reported current assets of $120,000 and current liabilities of $150,000. Instructions Calculate the following: a) Working.
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Ex. 6-108Earnings approach to revenue recognition Fabathletics sends an outfit to monthly subscribers each month.If the customer does NOT want the outfit in a given month they can send it back before the last day of that month free of charge in exchange for a store credit.Fab prepares its financial statements.
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Ex. 7-86Restricted cash balances Some lending institutions require customers who borrow money from them to keep minimum cash balances in their chequing or savings accounts.What are these balances called?Explain why they might need to be separately reported on the company’s statement of financial position. Ex. 7-87Classification of accounts receivable Trade receivables are amounts.
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Ex. 90Sales Returns and Allowances Assume that Olympia Corporation estimates that approximately 5% of its $1.5 million of trade receivables outstanding will be returned or some adjustment will be made to the sales price. Instructions a)        Prepare the entry to show expected sales returns and allowances. b)        Explain why it is important to prepare.
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Exercise 6-100Allocate transaction price Periwinkle Company manufactures equipment.Periwinkle’s products range form simple automated machinery to complex systems containing numerous components.Unit selling pices range from $140,000 to $1,200,000 and are quoted inclusive of installation.The installation process does NOT involve changes to the features of the equipment to perform specifications.Periwinkle has the following.
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PROBLEMS Pr. 6-116Long-term contract On January 1, 2017, Charger Corp., a management consulting firm, entered into a contract with Viking Company to provide advisory services over a four-year period. The contract price was $4,000,000 and was to be paid in four equal annual payments at the end of each year. Charger’s.
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31.The actions a company takes to add value are referred to as the a) critical event. b) earnings approach. c) earnings process. d) risks and rewards of ownership. 32.If the earnings process has a critical event, it is often referred to as a a) point of delivery. b) constructive obligation. c) discrete earnings process. d) transfer of risks and.
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Ex. 6-104Timing of revenue recognition Asana Inc. enters into a contract with Modo Company to develop and install a customized enterprise resource planning system (ERP).Progress payments are made upon completion of each stage of the contract. If the contract is terminated, the partly completely ERP will pass to Modo Company.Asana is.
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21. At the time of contract signing, a) no journal entry is recorded. b) a contract liability is recorded. c) a contract asset is recorded. d) a note to the financial statements must be included. 22. When contract modification occurs, and the company determines a new contract and performance obligation has resulted, a) the accounting for.
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Ex. 7-88Nontrade receivables Nontrade receivables are created by a variety of transactions and can be written promises either to pay cash or to deliver other assets.Provide three examples of nontrade receivables. Ex. 7-89Recording of trade discounts On March 2, Janssen Ltd. sold $30,000 of inventory items on credit with the terms 1/10, net.
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Pr. 5-114Statement of Cash Flows – indirect method Use the information provided in Pr. 5-113. Prepare a statement of cash flows (for operating activities only) for the year ended December 31, 2017 using the indirect method. *Pr. 5-115Calculation of ratios Brandon Systems Inc. has provided you with the following information: 20172016 Cash.................................$ 21,000$ 47,000 Short-term (trading).
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MULTIPLE CHOICE—Conceptual 1.              Which of the following statements is correct regarding receivables? a) Receivables are written promises of the purchaser to pay for goods or services. b) Receivables are claims held against customers and others for money, goods, or services. c) Receivables are non-financial assets. d) Receivables that are expected to be collected within a.
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Exercises Ex. 6-87Constructive obligation Picot Ltd.Sells goods with $200 with a standard return policy.The policy states customers may return goods within 30 days of purchase if defective.This policy is stated on the bill and contract; however, Picot advertises that it stands by its products 100%.In the past, they have been known to.
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Pr. 5-111Statement of financial position presentation The following statement of financial position was prepared by the bookkeeper for Badger Corp. at December 31, 2017. Badger Corp. Statement of Financial Position December 31, 2017 Cash...................$90,000Accounts payable...........$75,000 Accounts receivable (net)..52,200Long-term liabilities..........110,000 Inventories..............57,000Shareholders’ equity.........208,500 Investments.............76,300 Equipment (net)..........86,000 Patents.................32,000________ .......................$393,500$393,500 The following additional information is provided: 1.“Cash” includes prepaid insurance of $9,400; as well, a bank overdraft.
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Pr. 5-112Calculation of ending retained earnings The records of Biloxi Corp. for calendar 2017 reflected the following correct pre-tax amounts: gain from discontinued operations, $50,000; cash dividends declared and paid, $45,000; retained earnings, January 1, 2017, $275,000, correction of accounting error, $35,000 debit; income before income taxes and before discontinued operations,.
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EXERCISES Ex. 7-80Cash management from a business perspective Cite and explain three (3) practices and/or procedures companies engage in to manage their cash balances. Ex. 7-81Accounts receivable planning and control For many reasons, it is important for management to carefully consider how to manage and control its accounts receivable balances.Explain two (2) reasons why.
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11. According to the AcSB guidelines, the process of reporting an item in the financial statements of an entity is a) recognition. b) realization. c) allocation. d) matching. 12.              Control of an asset normally coincides with a) transfer of possession to the buyer. b) transfer of legal title to the buyer. c) transfer of both possession and.
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Multiple Choice—Computational 61. On January 1, 2017, Reggae Ltd. sold land that cost $180,000 for $240,000, receiving a note bearing interest at 10 percent. The note will be paid in three annual instalments of $96,510 starting December 31, 2017. Assuming that collection of the note is very uncertain, how much revenue.
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MULTIPLE CHOICE—Computational 55. Steinert Company has the following items at yearend: Cash in bank...............................$35,000 Petty cash.................................500 Short-term paper with maturity of 2 months.......8,200 Postdated cheques.......................... 2,100 Steinert should report cash and cash equivalents of a) $35,000. b) $35,500. c) $43,700. d) $45,800. Feedback: $35,000 + $500 + $8,200 = $43,700 56.Valiant Inc. reported the following amounts: Cash in Bank—chequing account of $18,500,.
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Ex. 6-92Revenue recognition process Assume that Bombardier Inc. signs a contract to sell light-rail-transit (LRT) vehicles to the Region of Waterloo for $15 million. Instructions Using this transaction as an example, illustrate the five steps in the revenue recognition process for Bombardier. Ex. 6-93Revenue recognition process How would your answer to Exercise 6-92 change if.
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Pr. 6-121Completed-contract method Broncos Construction Ltd. reported the following construction activity in 2017, their first year of operations: CashCostsEstimated Total BillingscollectionsIncurredAdditional ContractthroughthroughthroughCosts to Contract    Price 12/31/1712/31/1712/31/17Complete X$260,000$170,000$155,000$182,000$  63,000 Y325,000130,000130,000100,000247,000 Z  388,000  388,000  316,000  252,000      -0-   $973,000$688,000$601,000$534,000$310,000 Each of the above contracts is with a different customer, and any work remaining at December 31, 2017 is expected to be completed in 2018. Instructions Prepare.
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41. Which of the following is NOT a difference between factoring and securitization of receivables? a) In securitization, many investors are involved, whereas factoring usually involves only one company. b) Receivables are derecognized when securitized, but not when factored. c) The quality of receivables factored tends to be lower than those securitized. d) The.
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Ex. 7-84Reporting of cash At December 31, 2017, Burkina Ltd.’s general ledger Cash balance was $24,600. In addition, Burkina held the following items in its safe on December 31: 1.A cheque for $780 from Zambia Ltd. received December 30, 2017, which was not deposited until January 2, 2018. 2.A cheque from Zanzibar Inc..
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Ex. 6-91Terminology In the space provided at right, write the word or phrase that is defined or indicated. 1.A contract that is no longer______ profitable to the company. 2.An entity may have an implicit obligation______ even if it is not explicitly noted in the sales contract. 3.Sales that are comprised of______ several individual components. 4.The party acting as an.
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41. Conditional rights should be reported on the statement of financial position a) as contract assets. b) as receivables. c) only once the conditions have been met. d) as contract liabilities. 42. Under IFRS, where a right to return exists, a) sales returns and allowances are recognized as contra accounts to Revenues and Accounts Receivable. b) a.
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PROBLEMS Pr. 5-110Statement of financial position format The following statement of financial position has been submitted to you by an inexperienced bookkeeper. List your suggestions for improvements in the format of the statement of financial position. Consider both terminology deficiencies as well as classification inaccuracies. Hathaway Industries Inc. Statement of Financial Position For the Period.
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Ex. 6-94Contract identification Coffee Co. enters into a contract to delivery coffee to the House of Commons on July 1, 2017.The House agrees to pay the full price of $3,000 on August 1, 207.The cost of goods is $1,400.Coffee Co. delivers the coffee to the House on July 1, 2017 and.
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Ex. 6-102Bundled sales Canucks Inc., a software company sells new accounting software and user support bundled together. The fair value of the software is $1,500 and the fair value of the user support is $500. The user support is valid for a period of 12 months from the date of software.
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11. The general accounting standards for recognition and measurement of accounts receivable include a) measuring the receivable initially at amortized cost. b) measuring the receivable initially at fair value. c) after initial recognition, measuring the receivable at fair value. d) not recognizing the receivable until it is paid. 12. Trade discounts are generally NOT used.
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Ex. 6-114Presentation & the percentage-of-completion method Thuxton Inc. began work on a $6,000,000 non-cancellable contract in 2017 to construct a retail building.During 2017, Thuxton incurred costs of $1,500,000 and billed its customers for $1,400,000 (non-refundable), and collected $1,000,000.At December 31, 2017, the estimated future costs to complete the project total $2,500,000. Instructions Prepare.
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Ex. 6-106Percentage-of-completion method Jets Ltd. contracted to build a high-rise for $6,000,000. Construction began in 2017 and is expected to be completed in 2020. Data for 2017 and 2018 are: 2017 2018 Costs incurred...............................$900,000$1,700,000 Estimated costs to complete....................3,600,0002,400,000 Instructions Using the percentage-of-completion method and the cost-to-cost basis, a)How much gross profit should be reported for 2017?.
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Pr.6-120Percentage-of-completion and completed-contract methods               On June 15, 2017, Lion Construction signed a $360,000 contract to build a small building. Lion estimated that the total cost would be $320,000. Construction started immediately because the required completion date was August 31, 2018. Lion’s relevant data relating to this construction project were as.
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Ex. 6-98Sales with discounts Green Company sells goods to Thumb Inc. on account on January 1, 2017.The goods have a sales price of $312,000 (cost $164,000).The terms of sale are net 30.If Thumb pays within 5 days, it receives a cash discount of $12,000.Past history indicates that the cash discount will.
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Ex. 6-96Performance obligations Trikonasana Inc. enters into a contract to design and build a bridge connecting a busy downtown core to a shoreline across the way that is home to many commuters.Trikonasana is responsible for overall management of the project and identifies various goods and services to be provided, including engineering,.
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Pr. 6-122Consignment sales On July 2, Cardinal Corp. ships merchandise costing $460,000 on consignment to Dolphin Stores. Cardinal pays the freight of $10,000. Upon sale, Dolphin Stores will receive a 12% commission and a 6% allowance to offset its advertising expenses. At the end of the month, Dolphin notifies Cardinal that.
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Pr. 6-119Percentage-of-completion and completed-contract methods               On January 1, 2017, Falcon Construction Ltd. started a construction project for $4,500,000. Relevant data for 2017 and 2018 are as follows: 20172018 Current year construction costs$3,300,000$  620,000 Estimated remaining costs to complete600,000-0- Current year billings3,100,0001,400,000 Current year collections 3,000,0001,500,000               Instructions               Calculate the following amounts for each method: CompletedPercentage-of- Contract   Completion 2017201820172018 a).
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