Financial Accounting Paper 4

1

DEF is the consignee for 1,000 units of product X for ABC Company. ABC should recognize the revenue from these 1,000 units when






2

A physical inventory count showed an entity had inventory costing $1,000,000 on hand at December 31, Year 1. Excluded from this amount were the following: Goods costing $82,000, shipped to a customer free on board (FOB) shipping point on December 28, Year 1. They were expected to be received by the customer on January 4, Year 2. ? Goods costing $122,000, shipped to a customer free on board (FOB) destination December 30, Year 1. They were expected to be received by the customer on January 5, Year 2. Compute the correct ending inventory to be reported on the shipper’s statement of financial position at December 31, Year 1.






3

Vadis Co. sells appliances that include a 3-year warranty. Service calls under the warranty are performed by an independent mechanic under a contract with Vadis. Based on experience, warranty costs are estimated at $30 for each machine sold. When should Vadis recognize these warranty costs?






4

East Corp. manufactures stereo systems that carry a 2-year warranty against defects. Based on past experience, warranty costs are estimated at 4% of sales for the warranty period. During the year, stereo system sales totaled $3 million, and warranty costs of $67,500 were incurred. In its income statement for the year ended December 31, East should report warranty expense of






5

On April 1, Ash Corp. began offering a new product for sale under a 1-year warranty. Of the 5,000 units in inventory at April 1, 3,000 had been sold by June 30. Based on its experience with similar products, Ash estimated that the average warranty cost per unit sold would be $8. Actual warranty costs incurred from April 1 through June 30 were $7,000. At June 30, what amount should Ash report as estimated warranty liability?






6

Management accounting differs from financial accounting in that financial accounting is






7

Companies characterized by the production of heterogeneous products will most likely use which of the following methods for the purpose of averaging costs and providing management with unit cost data?






8

Companies characterized by the production of heterogeneous products will most likely use which of the following methods for the purpose of averaging costs and providing management with unit cost data?






9

When should an anticipated loss on a long-term contract be recognized under the percentage-of-completion method and the completed-contract method, respectively?
Percentage-of-completion
Completed-contract






10

In accounting for a long-term construction contract using the percentage-of-completion method, the progress billings on contracts account is a






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