M51C ASN03- W03 QUIZ

For all questions, round all percentages to one decimal place (for example, 45.2%).

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.