23) A right of return exists when: A) the customer is entitled to a full or partial refund. B) the customer is entitled to a credit against amounts owed. C) the customer is entitled to another product in exchange. D) any one of these conditions is met. 19) Noah Construction Company is building a large complex for a contract price of $5,000,000. This is a three-year project and the requirements for recognizing revenue over time are met. The total estimated cost of the project is $4,000,000 and the following information is available: ($ in thousands) Costs incurred Estimated completion costs Billings Cash collected Year 1 $ 1,000 $ 3,000 $ 750 $ 500 Year 2 $ 1,500 $ 1,500 $ 1,750 $ 1,500 Year 3 $ 1,250 $ 0 $ 2,500 $ 3,000 Which one of the following entries would be made in Year 1 to record the costs incurred using the percentage-of-completion method of revenue recognition? A) DR Inventory: Construction in progress $1,000,000 CR Accounts payable, cash, etc. $1,000,000 B) DR Inventory: Construction in progress$1,000,000 CR Income on long-term constructio contract$1,000,000 C) DR Inventory: Construction in progress$1,000,000 CR Billings on construction in progress$1,000,000 D) DR Income on long-term construction contract$1,000,000 CR Accounts payable, cash, etc.$1,000,000 20) Noah Construction Company is building a large complex for a contract price of $5,000,000. This is a three-year project and the requirements for recognizing revenue over time are met. The total estimated cost of the project is $4,000,000 and the following information is available: ($ in thousands) Costs incurred Estimated completion costs Billings Cash collected Year 1 $ 1,000 $ 3,000 $ 750 S 500 Year 2 $ 1,500 $ 1,500 $ 1,750 $ 1,500 Year 3 $ 1,250 $ 0 $ 2,500 $ 3.000 Which one of the following entries would be made in Year 2 to record the customer billing using the percentage-of-completion method of revenue recognition? A) DR Accounts receivable$1,500,000 CR Cash$1,500,000 B) DR Accounts receivable$1,500,000 CR Billings on construction in progress $1,500,000 C) DR Accounts receivable$1,750,000 CR Income on long-term construction contract$1,750,000 D) DR Accounts receivable$1,750,000 CR Billings on construction in progress$1,750,000 21) On January 1, 2018, Monroe Contractors signed a contract to inspect and complete needed repairs to the water lines for the town of Pleasantville. Because Monroe will not know which water lines will need repairs until after it completes the inspections, it is difficult to accurately estimate the amount it will charge the town. Therefore, Monroe will recognize revenue for the contract using the completed-contract method. The work is expected to be completed in 2020. Using a completed-contract method prior to ASC Topic 606 for revenue recognition, if Monroe had $1.5 million in its Construction In Progress Inventory account and billings to Pleasantville of $2 million as of December 31, 2018, how much net income should Monroe Construction recognize for 2018? A) SO B) $500,000 C) $2 million D) $1.5 million
