Reference no: EM133034360
Questions -
Q1. If a franchisor acts as an agent for the franchisee, he will:
defer recognition of profit until completion of the transaction
not recognize revenue
recognize profit
record the transaction in his books
Q2. Sunny Corporation began constructing a building with a contract price of $43,800,000 in 2009. The ledgers of Sunny Corporation for 2010 shows the following accounts: Construction in Progress - $10,400,000 Accounts Receivable - $3,200,000 Gross Profit earned - $3,952,000 Progress billings to date - $6,500,000. How much was the amount of collection in 2009?
Q3. Wendy's granted a franchise to Mac where Mac will have to pay franchise fee of $5,000,000 payable in 4 equal annual installments with the first payment starting on the date of signing the contract. The franchisee was to pay 5% of gross sales of the preceding month. Should the operations of the outlet prove to be unprofitable, the franchise may be cancelled with whatever obligation owing Wendy's, in connection with the $5,000,000 franchise fee waived. If the first year of operations generated a gross sales of $1,340,000, how much franchise fee did Wendy's earn?
Q4. Last year, 3K, Inc. started work on a $10,600,000 construction contract which was completed this year. It has consistently used the percentage of completion method of recognizing income. Accounting data provided last year were as follows: Debit: Progress Billings $4,300,000; Credits: Cost incurred $3,450,000 Collections $3,900,000 Estimated cost to complete $3,630,000. How much of this contract was recognized last year?
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