.0/msohtmlclip1/01/clip_image001.jpg”>For all questions,
round all percentages to one decimal place (for example, 45.2%).
1. We
Build It Corp. (WBIC) is a general contractor that specializes in constructing
apartment buildings. WBIC is a publicly accountable enterprise and its year end
is December 31. During 20X4, WBIC contracted with Apartment Rentals Inc. (ARI)
to construct a single apartment building at a fixed price of $20 million. WBIC
determined that this contract represents a single performance obligation
satisfied over time. The company only prepares adjusting entries and accruals
at year end. Other pertinent information follows:
|
($’000s) |
20X4 |
20X5* |
20X6** |
20X7*** |
|
Cumulative |
4,000 |
11,000 |
17,000 |
20,200 |
|
Estimated |
14,000 |
6,500 |
4,000 |
0 |
|
Progress |
5,200 |
7,400 |
6,000 |
1,400 |
|
Collections |
4,900 |
7,600 |
5,400 |
2,100 |
* The
revised cost data was not known in 20X4.
** The
revised cost data was not known in 20X4 or 20X5.
*** The
revised cost data was not known in 20X4, 20X5 or 20X6.
Assume
that WBIC uses the cost-to-cost method to estimate its progress to completion.
What was the total cost of sales expense (in ’000s) recognized by WBIC in 20X6?
a)
$6,000
b)
$6,200
c)
$7,000
d)
$17,000
Use the following
information to answer questions 2 and 3.
Let It Snow Corp.
(LSC) is a retailer of ski and snowboard equipment. You have been asked to
estimate the company’s closing inventory at April 30, 20X9, to validate the
accuracy of the year-end inventory count. Pertinent details for fiscal 20X9
follow:
|
Cost |
Retail |
|
|
Gross |
$1,685,000 |
|
|
Sales |
38,000 |
|
|
Beginning |
$220,000 |
411,000 |
|
Purchases |
975,000 |
1,834,000 |
|
Purchase |
23,000 |
36,000 |
|
Freight |
18,000 |
|
|
Additional |
— |
71,000 |
|
Markup |
— |
18,000 |
|
Markdowns |
— |
69,000 |
|
Markdown |
— |
8,000 |
·
Historically, LSC has averaged a 64.50% gross
margin.
·
LSC rounds all percentages to
two decimal places (for example, 31.47%).
2. Assume
that LSC uses the retail method to estimate its closing inventory. Based on
this estimate, what value will LSC report for inventory on its statement of
financial position as at April 30, 20X9?
a)
$287,027
b)
$291,459
c)
$299,548
d)
$554,000
3.
Assume that LSC uses the
gross profit method to estimate its closing inventory. Based on this estimate,
what amount will LSC report as cost of goods sold expense on its statement of
comprehensive income for the year ended April 30, 20X9?
a)
$422,450
b)
$584,685
c)
$598,175
d)
$605,315
4. Mega
Retailer Inc. (MRI) is a retailer of children’s toys. Select transaction data
pertaining to its inventory holdings in August 20X3 follow:
|
Event |
# of units |
Cost |
Sale price |
|
Opening |
500 |
$10,000.00 |
|
|
Sale |
100 |
$4,000.00 |
|
|
Purchase |
300 |
6,300.00 |
|
|
Freight |
100.00 |
||
|
Sale |
225 |
9,225.00 |
|
|
Freight |
180.00 |
||
|
Purchase |
350 |
6,650.00 |
|
|
Freight |
110.00 |
||
|
Sale |
175 |
6,650.00 |
|
|
Sale |
275 |
10,725.00 |
·
MRI uses the weighted average cost flow
assumption to account for its inventory.
·
MRI rounds all calculations
to the nearest whole cent (for example, $21.46).
Assume
that MRI uses a perpetual inventory system to account for its inventories. What
is the cost of goods sold expense that MRI will report on its statement of
comprehensive income for the month ending August 31, 20X3?
a)
$15,515.75
b)
$15,608.50
c)
$15,646.25
d)
$15,745.25
5. Canaan’s
Crumpets Corp. (CCC) pays a monthly service charge to its bank based on its
account activity (deposits made and cheques written) during that month. When
CCC was performing its bank reconciliation for the month ending August 31,
20X2, it observed that it was charged a $120 service charge on August 31. What
action must CCC take to ensure that its bank reconciliation balances?
a)
Add the amount to the bank balance on the
bank statement.
b)
Add the amount to the cash balance in the
general ledger.
c)
Deduct the amount from the bank balance on
the bank statement.
d)
Deduct the amount from the cash balance in
the general ledger.
