1. (TCO A) The percentage-of-completion method must be used when certain conditions exist. Which of the following is NOT one of those necessary conditions? (Points : 5)

Estimates of progress toward completion, revenues, and costs are reasonably dependable. The contractor can be expected to perform the contractual obligation. The buyer can be expected to satisfy some of the obligations under the contract The contract clearly specifies the enforceable rights of the parties, the consideration to be exchanged, and the manner and terms of settlement.

Question 2. 2. (TCO A) Tim Construction Co. began operations in 2014. Construction activity for 2014 is shown below. Tim uses the percentage of completion method.

Contract	Contract Price	Billings Through 12/31/14	Collections Through 12/31/14	Costs to 12/31/14	Estimated Costs to Complete
1	$5,200,000	$3,500,000	$2,600,000	3,000,000	1,000,000
2	3.600,000	1,500,000	1,000,000	800,000	1,600,000
3	3,300,000	1,900,000	1,800,000	2,250,000	1,200,000

What amount of Gross Profit should Tim show on the Income Statement of 2014 related to Contract 2? (Points : 5)

$1,200,000 $400,000 $800,000 $2,400,000

Question 3. 3. (TCO B) K Corporation's partial income statement after its first year of operations is as follows: Income before Income Taxes $3,750,000 Income Tax expense Current $1,035,000 Deferred 90,000 __________ 1,125,000 __________ Net Income $2,625,000 K uses the straight-line method of depreciation for financial reporting purposes and accelerated depreciation for tax purposes. The amount charged to depreciation expense on its books this year was $1,200,000. No other differences existed between book income and taxable income except for the amount of depreciation. Assuming a 30% tax rate, what amount was deducted for depreciation on the corporation's tax return for the current year? (Points : 5)

$1,200,000 $1,425,000 $1,500,000 $1,800,000

Question 4. 4. (TCO B) A deferred tax liability is classified on the balance sheet as either a current or a noncurrent liability. The current amount of a deferred tax liability should generally be (Points : 5)

the net deferred tax consequences of temporary differences that will result in net taxable amounts during the next year. totally eliminated from the financial statements if the amount is related to a noncurrent asset. based on the classification of the related asset or liability for financial reporting purposes. the total of all deferred tax consequences that are not expected to reverse in the operating period or one year, whichever is greater.