QUESTION: 2141

Topaz Metals Inc. produces precious metals from its mining operations. The selling price for its product is reasonably assured, the units are interchangeable, and the costs of selling and distributing the product are insignificant. In order for Topaz to recognize revenue as early in the revenue cycle as is permitted under generally accepted accounting principles, the revenue recognition method that Topaz should use is the ________.

percentage-of-completion method
production method
cash method
completed-contract method
cost recovery method

Answer(s): B

Explanation:

Revenue is recognized when the conditions of "realized" or "realizable" and earned are met. If products are readily realizable because they are salable at reliably determinable prices without significant effort, revenues may be recognized at completion of production.

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QUESTION: 2142

The following financial data on CashCow, Inc. have been taken from its financial statements for 1996:

Dividends paid $25,000
Sale of land $64,000
Inventory purchases $29,000
Purchase of a warehouse $208,000
Bonds issued $90,000
F Dividends received from investments $17,000
Interest paid on bonds $2,400
Salaries paid $107,400
Cash collection from customers $28,400
Loss on land sale $18,000
Beginning cash balance $312,000
In the above question, the ending cash balance of the firm was ________.
$157,600
$121,600
$139,600
N. $172,400

Answer(s): C

Explanation:

Note that the loss on equipment is a non-cash event. Using the direct method, beginning cash balance + net cash inflow = ending cash balance Hence, ending balance = 312,000 + (-25,000+64,000-29,000 - 208,000 + 90,000 + 17,000 - 2,400 - 107,400 + 28,400) = $139,600.

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QUESTION: 2143

The par value of a common stock represents

the estimated market value of the stock when it was issued.
none of these answers.
the liability ceiling of a shareholder when a company undergoes bankruptcy proceedings.
the total value of the stock that must be entered in the issuing corporation's records.
the amount that must be recorded on the issuing corporation's record as paid-in capital.

Answer(s): C

Explanation:

Par value represents a stock's legal capital. It is an arbitrary value assigned to stock before it is issued. Par value represents a shareholder's liability ceiling because, as long as the par value has been paid in to the corporation, the shareholder obtains the benefits.

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QUESTION: 2144

Which of the following is NOT a revenue recognition method when there is uncertainty surrounding the realizability of income?

Completed Contract Method
Cost Recovery Method
Installment Sales Method
Real Estate Method

Answer(s): A

Explanation:

The completed contract method is used for revenue recognition in the case of long-term contracts. In particular, it is chosen instead of the percentage-of-completion method if there are no reliable measures of the degree to which the contract obligations have been fulfilled.

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QUESTION: 2141

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QUESTION: 2142

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QUESTION: 2143

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QUESTION: 2144

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