Reference no: EM132749403

Questions -

Q1. Carter Builders uses the percentage-of-completion method of accounting for its construction contracts. They estimated the total cost of completing job #129 as being $500,000, and actually incurred costs of $100,000 in 2001 and $400,000 in 2002. The total contract price for the job was $600,000. Carter's 2001 income statement should show a gross profit from this job of

a. $80,000.

b. $20,000.

c. $25,000.

d. $100,000.

Q2. Duschene Construction uses the percentage-of-completion method of accounting for its construction contracts. They estimated the total cost of completing job #5692 as being $250,000, and actually incurred costs of $150,000 in 2001 and $100,000 in 2002. The total contract price for the job was $350,000 and the contract was completed in 2002. Duschene's 2001 revenues from this job are

a. $140,000.

b. $210,000.

c. $100,000.

d. $350,000.

Q3. Restrictions of retained earnings

a. are reported on the balance sheet as liabilities.

b. provide insurance coverage for contingencies.

c. do not change total shareholders' equity.

d. are reported as expenses on the income statement.

Q4. Ownership of common shares ordinarily carries the right to

a. declare dividends.

b. establish a drawings account.

c. enter into contracts for the corporation.

d. vote on corporate actions that require shareholder approval.

Q5. A corporation is formed when

a. it borrows money.

b. it receives a charter from its president.

c. it is granted by-laws by the federal government.

d. none of the above

Q6. To be considered useful, financial information should possess all the following qualitative characteristics except

a. relevance.

b. reliability.

c. materiality.

d. understandability.

Q7. The concept of consistency

a. means that only one method of inventory accounting should be allowed.

b. is the primary motivation for inflation accounting.

c. suggests that companies should use the same set of accounting principles each year.

d. implies that companies should use a single useful life for amortizing all of their assets.