Question

12.

On November 1, 2018, Taylor signed a one-year contract to provide handyman services on an as-needed basis to King Associates, with the contract to start immediately. King paid Taylor $4,800 for the one-year period on November 1, 2018. Taylor should recognize revenue in 2018 in the amount of ______. A. $0 B. $800 C. $2,400 D. $4,800

13.

Rothbart Manufacturing agrees to manufacture bumper cars for 12 Banners Amusement Parks. Under the terms of the contract, 12 Banners will pay Rothbart a total of $60,000, and 12 Banners can cancel the contract if it so chooses but must pay Rothbart for work completed. Rothbart believes that, if 12 Banners cancelled the contract, Rothbart could sell the bumper cars to another amusement park and still make a profit. The manufacturing contract is expected to last six months, and as of December 31, 2018, the job is 80% complete. How much revenue should Rothbart recognize in 2018 for this contract? A. $0 B. $12,000 C. $48,000 D. $60,000

14.

On July 15, 2018, Ortiz & Co. signed a contract to provide EverFresh Bakery with an ingredient-weighing system for a price of $90,000. The system included finely tuned scales that fit into EverFresh's automated assembly line, Ortiz's proprietary software modified to allow the weighing system to function in EverFresh's automated system, and a one-year contract to calibrate the equipment and software on an as-needed basis. (Ortiz competes with other vendors who offer ongoing calibration contracts for Ortiz's systems.) If Ortiz was to provide these goods or services separately, it would charge $60,000 for the scales, $10,000 for the software, and $30,000 for the calibration contract. Ortiz delivered and installed the equipment and software on August 1, 2018, and the calibration service commenced on that date. Assume that the scales, software, and calibration service are all separate performance obligations. How much revenue will Ortiz recognize in 2018 for this contract? A. $0 B. $63,000 C. $74,250 D. $90,000

15.

On April 1, Bob the Builder entered into a contract of one-month duration to build a barn for Nolan. Bob is guaranteed to receive a base fee of $5,000 for his services in addition to a bonus depending on when the project is completed. Nolan created incentives for Bob to finish the barn as soon as he can without jeopardizing the structural integrity of the barn. Nolan offered to pay an additional 30% of the base fee if the project finished two weeks early and 10% if the project finished a week early. The probability of finishing two weeks early is 30% and the probability of finishing a week early is 60%. What is the expected transaction price with variable consideration estimated as the expected value? A. $4,750 B. $5,000 C. $5,500 D. $5,750

16.

Sanjeev enters into a contract offering variable consideration. The contract pays him $1,000/month for six months of continuous consulting services. In addition, there is a 60% chance the contract will pay an additional $2,000 and a 40% chance the contract will pay an additional $3,000, depending on the outcome of the consulting contract. Sanjeev concludes that this contract qualifies for revenue recognition over time. Assume that Sanjeev estimates variable consideration as the most likely amount. After Sanjeev has recognized revenue for two months of the contract, he changes his assessment of the chance the contract will pay him $3,000 to 70%. What adjustment to revenue should Sanjeev recognize to account for that change in estimate? A. debit of $1,000 B. debit of $334 C. credit of $1,000 D. credit of $334 Please give us the process and reasons for solving the problem，thanks a lot

Answer 1

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