For all questions, round all percentages to one decimal place:
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 costs incurred
|
4,000
|
11,000
|
17,000
|
20,200
|
|
Estimated costs to complete
|
14,000
|
6,500
|
4,000
|
0
|
|
Progress billings during the year
|
5,200
|
7,400
|
6,000
|
1,400
|
|
Collections during the year
|
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 sales
|
|
$1,685,000
|
|
Sales returns and allowances
|
|
38,000
|
|
Beginning inventory
|
$220,000
|
411,000
|
|
Purchases
|
975,000
|
1,834,000
|
|
Purchase returns
|
23,000
|
36,000
|
|
Freight
|
18,000
|
|
|
Additional markups
|
-
|
71,000
|
|
Markup cancellations
|
-
|
18,000
|
|
Markdowns
|
-
|
69,000
|
|
Markdown cancellations
|
-
|
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 inventory Aug. 1, 20X3
|
500
|
$10,000.00
|
|
|
Sale Aug. 5, 20X3
|
100
|
|
$4,000.00
|
|
Purchase Aug. 8, 20X3
|
300
|
6,300.00
|
|
|
Freight in Aug. 8, 20X3
|
|
100.00
|
|
|
Sale Aug. 13, 20X3
|
225
|
|
9,225.00
|
|
Freight out, Aug. 13, 20X3
|
|
180.00
|
|
|
Purchase Aug. 18, 20X3
|
350
|
6,650.00
|
|
|
Freight in Aug. 18, 20X3
|
|
110.00
|
|
|
Sale Aug. 25, 20X3
|
175
|
|
6,650.00
|
|
Sale Aug. 28, 20X3
|
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.