Percentage of completion used to recognize gross profit

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Multiple choice questions on Inventory methods

1.The LIFO Conformity Rule states that if LIFO is used for:
a.one class of inventory, it must be used for all classes of inventory.
b.tax purposes, it must be used for financial reporting.
c.one company in an affiliated group, it must be used by all companies in an affiliated group.
d.domestic companies, it must be used by foreign partners.

2. The cost of goods available for sale is allocated between
a.beginning inventory and ending inventory.
b.beginning inventory and cost of goods on hand.
c.ending inventory and cost of goods sold.
d.beginning inventory and cost of goods sold.

3. For a typical manufacturing company, the most common critical point for recognizing revenue is the date:
a.an order is received.
b.production is completed.
c.the product is delivered.
d.the payment is received.

4.Under the realization principle, revenue should not be recognized until the earnings process is deemed virtually complete and:
a.revenue is realized.
b.any receivable is collected.
c.collection is reasonably certain.
d.collection is absolutely assured.

5. Using the percentage-of-completion method of accounting for long-term contracts, the percentage of completion used to recognize gross profit in the first year usually is determined by measuring:
a.costs incurred in the first year, divided by estimated remaining costs to complete the project.
b.costs incurred in the first year, divided by estimated total costs of the completed project.
c.costs incurred in the first year, divided by estimated gross profit.
d.None of the above is correct.

Reference no: EM1312874

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