QUESTION: 1737

The completed contract method

may understate gross profit.
generally must be used when no contract exists.
cannot be used for short-term contracts.
may be used for long-term contracts at the option of the company.
recognizes revenues and costs in proportion to the work completed.

Answer(s): B

Explanation:

The completed contract method recognizes revenues and expenses only at the end of the contract. It must be used when any one of the conditions required for use of the percentage-of-completion method is not met.

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QUESTION: 1738

All of the following are typically fixed expenses except for ________.

raw materials
rent
insurance
property taxes

Answer(s): A

Explanation:

Fixed expenses are costs that are relatively constant and costs that would be difficult to match directly with units being sold.

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QUESTION: 1739

An end-of-period adjustment for depreciation of fixed assets is necessary:

to recognize the expense of using fixed assets
all of these answers
proper statement of net income
to be consistent with the matching principle

Answer(s): B

Explanation:

An adjustment for depreciation expense matches expenses with revenues for the period, thus contributing to correct statement of net income for the period.

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QUESTION: 1740

A ratio that measures the average portion of each dollar of revenue that results in profit is

profit margin
both of these answers are correct
neither of these answers is correct
return on sales

Answer(s): B

Explanation:

Profit margin, also called return on net sales, is calculated by dividing net income by net sales. This ratio measures the average portion of each dollar of revenue that ends up as profit.

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Free CFA-Level-I Exam Braindumps (page: 435)

QUESTION: 1737

Explanation:

QUESTION: 1738

Explanation:

QUESTION: 1739

Explanation:

QUESTION: 1740

Explanation: