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Multiple choice questions on construction costing and accounting

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1. Indiana Co. began a construction project in 2008 that will provide it $150 million when it is completed in 2010. During 2008, Indiana incurred $36 million of costs and estimates an additional $84 million of costs to complete the project. Using the percentage-of-completion method, Indiana:
a.Recognized no gross profit or loss on the project in 2008.
b.Recognized $6 million loss on the project in 2008.
c.Recognized $9 million gross profit on the project in 2008.
d.Recognized $36 million loss on the project in 2008.

2.On December 15, 2008, Rigby Sales Co. sold a tract of land that cost $3,600,000 for $4,500,000. Rigby appropriately uses the installment sale method of accounting for this transaction. Terms called for a down payment of $500,000 with the balance in two equal annual installments payable on December 15, 2009, and December 15, 2010. Ignore interest charges. Rigby has a December 31 year-end.
In 2008, Rigby would recognize realized gross profit of:
a.$500,000.
b.$0.
c.$900,000.
d.$100,000.

3.On December 15, 2008, Rigby Sales Co. sold a tract of land that cost $3,600,000 for $4,500,000. Rigby appropriately uses the installment sale method of accounting for this transaction. Terms called for a down payment of $500,000 with the balance in two equal annual installments payable on December 15, 2009, and December 15, 2010. Ignore interest charges. Rigby has a December 31 year-end
In 2009, Rigby would recognize realized gross profit of:
a.$0.
b.$450,000.
c.$300,000.
d.$400,000.

4.On December 15, 2008, Rigby Sales Co. sold a tract of land that cost $3,600,000 for $4,500,000. Rigby appropriately uses the installment sale method of accounting for this transaction. Terms called for a down payment of $500,000 with the balance in two equal annual installments payable on December 15, 2009, and December 15, 2010. Ignore interest charges. Rigby has a December 31 year-end.
In its December 31, 2008, balance sheet, Rigby would report:
a.Realized gross profit of $100,000.
b.Deferred gross profit of $100,000.
c.Installment receivables (net) of $3,200,000.
d.Installment receivables (net) of 4,000,000.

5.On December 15, 2008, Rigby Sales Co. sold a tract of land that cost $3,600,000 for $4,500,000. Rigby appropriately uses the installment sale method of accounting for this transaction. Terms called for a down payment of $500,000 with the balance in two equal annual installments payable on December 15, 2009, and December 15, 2010. Ignore interest charges. Rigby has a December 31 year-end.
At December 31, 2009, Rigby would report in its balance sheet:
a.Realized gross profit of $500,000.
b.Deferred gross profit of $400,000.
c.Realized gross profit of $400,000.
d.Cost of installment sales of $1,600,000.

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