Reference no: EM132582090
Question 1: In May 20X2, the city council of Oshawa, Ontario awarded a $7.6 million contract to Build-It Corp. (BIC) to construct a new community centre in the city. The contract included a clause that provided for an early completion bonus if BIC finished the project at least one month before the scheduled completion date of October 31, 20X3. The bonus completion schedule, together with BIC's senior management's estimates as to the probability of finishing by the specified dates, follows: Project completion date Bonus payment Estimated probability Prior to July 31, 20X3 $400,000 10% Between August 1 and 31, 20X3 $300,000 20% Between September 1 and 30, 20X3 $200,000 40% October 1, 20X3, or later $0 30% BIC's year end is December 31. It reports its financial results in accordance with IFRS and uses the most likely amount to estimate variable consideration. What is the transaction price that should be used to recognize revenue for this contract?
a) $7,600,000
b) $7,680,000
c) $7,780,000
d) $7,800,000
Question 2: As an interim measure, Rickard Manufacturing Inc. calculates its allowance for doubtful accounts based on 3%of credit sales on a monthly basis. It then uses the balance sheet approach to estimate the required year-end allowance for doubtful accounts. The following data are available for the 11 months ending November 30, 20X5: Total sales for the 11 months ending November 30 20X5 $4,000,000 Credit sales as a percentage of total sales 80% Allowance for doubtful accounts January 1, 20X5 $60,000 CR Collection of accounts written of in prior years $9,000 Customer accounts written off as uncollectable between January 1 and November 30, 20X5 $35,000 What is the balance of the allowance for doubtful accounts for Rickard as at November 30, 20X5?
a) $ 96,000
b) $121,000
c) $130,000
d) $154,000
Question 3: Hopper Inc. follows the balance sheet approach in preparing its allowance for doubtful accounts (AFDA). The opening AFDA balance as at January 1, 20X3, was a credit of $8,700. During the 20X3 fiscal year, a total of $7,860 was written off as uncollectable for the year and a total of $650 in previously written-off accounts was recovered. Hopper has the following accounts receivable balances as at December 31, 20X3, including a breakdown of the percentage estimated by management to be noncollectable:
Days outstanding Balance % estimated to be uncollectable
0-30 days $480,520 0.5%
31-60 days 187,600 1.8%
61-90 days 77,250 2.5%
Greater than 90 days 38,760 4.5%
What is the total amount of bad debt expense that Hopper needs to record for the December 31, 20X3, fiscal year? Round to the nearest dollar.
a) $ 7,965
b) $ 8,615
c) $ 9,455