Question 1

Earnings are considered to be of lower quality if

Accepted Answer

A)  cash flow from operating activities is greater than net earnings.
B)  cash flow from financing activities is less than net earnings.
C)  cash flow from operating activities is less than net earnings.
D)  cash flow from investing activities is less than net earnings.

Question 2

The contract-based approach to revenue recognition must be used under:

Accepted Answer

A)  ASPE
B)  IFRS
C)  For both IFRS and ASPE
D)  This is an option under both IFRS and ASPE,companies may choose the method that best reflect the firm's economic position.

Question 3

The amount of revenue is one of the most significant amounts reported in the financial statements.

Accepted Answer

A) True 
 B)False

Question 4

EPS may be reported either on the statement of financial position or the statement of income.

Accepted Answer

A) True 
 B)False

Question 5

The choice of presenting expenses based on their nature or function rests with management.

Accepted Answer

A) True 
 B)False

Question 6

Frenzo Furniture Co.is a manufacturer of specialty furniture,and uses the contract-based approach for revenue recognition.Because each piece of furniture is custom manufactured,the company requires a contract prior to beginning the production process.Contract terms include a payment of 40% of the estimated cost of the finished piece before production begins.Frenzo Furniture Co.should record the collection as a

Accepted Answer

A)  credit to sales revenue.
B)  credit to unearned revenue.
C)  credit to inventory.
D)  credit to cost of goods sold.

Question 7

Under IFRS,companies offering sales discounts must adjust the original amount of the sales revenue by the expected sales discount.

Accepted Answer

A) True 
 B)False

Question 8

Revenue recognition approaches differ between IFRS and ASPE.

Accepted Answer

A) True 
 B)False

Question 9

Bailey Consulting,a Winnipeg based company that uses the contract-based approach to revenue recognition,has just signed a contract to complete a strategic plan for a local business.The five-step model Bailey Consulting should follow to recognize revenue should include all of the following,except for

Accepted Answer

A)  Allocate the transaction price to performance obligations
B)  Sign the contract
C)  Identify the performance obligations
D)  Determine the transaction price

Question 10

Melanie purchases an new Honda Civic.During the negotiations the sales representative gives her the opportunity to purchase a 10-year bumper to bumper warranty.This is referred to as a(n) :

Accepted Answer

A)  Assurance warranty
B)  Purchase warranty
C)  Money back guarantee
D)  Service warranty

Question 11

Use the following information for questions below
Magic Mountain accounts for revenues using the contract-based approach.It operates a ski resort in the Rocky Mountains of Alberta.They sell three types of ski tickets.Season tickets are sold throughout the year,and entitle the holder to ski any day all season long.They are non-refundable.Daily tickets are sold at the mountain and are only valid for the day they are sold.Corporate group tickets are sold throughout the year.The buyer receives a package of 20 daily ticket coupons at a discounted price and the coupons can be redeemed for a day of skiing any time during the season.The skier needs to present the coupon for a ticket on the desired ski day.Unused tickets (coupons) expire at the end of the season and are non-refundable.
-How should Magic Mountain account for the corporate tickets not redeemed?

Accepted Answer

A)  They should estimate an amount at the time of sale and recognize it as revenue then.
B)  They should estimate an amount at the time of sale and recognize it as revenue evenly throughout the ski season.
C)  They should estimate an amount at the time of sale and recognize it as revenue proportionally every time a coupon is redeemed.
D)  They should recognize it as revenue at the end of the ski season.

Question 12

Private companies must report comprehensive income in their financial statements.

Accepted Answer

A) True 
 B)False

Question 13

With consignment arrangements

Accepted Answer

A)  the consignee owns the goods
B)  the consignor has physical possession of the goods
C)  the consignor recognizes revenue when it transfers the goods to the consignee
D)  the consignor owns the goods until they are sold

Question 14

Rainbow Designers took a $1,500 deposit from a customer when they signed the contract to paint the customer's residence.It took them three weeks to complete the job.On completion the customer paid the $3,500 balance.How should Rainbow Designers recognize revenue for this job assuming the job is performed on one accounting period?

Accepted Answer

A)  The $1,500 as revenue when it is received,and the $3,500 as revenue when it is received.
B)  The $1,500 as unearned revenue and the $3,500 as revenue when it is received.
C)  $5,000 as revenue at the completion of the project.
D)  The $1,500 as unearned revenue and $5,000 as revenue when the project is completed.

Question 15

When following ASPE,all of the following criteria must be satisfied in order to recognize revenue for the provision of services,under the earnings based approach,except

Accepted Answer

A)  the service has been performed.
B)  the amount of consideration to be received can be measured with reasonably assurance.
C)  the seller has no continuing involvement.
D)  collection is reasonably assured.

Question 16

If a company generates gains,

Accepted Answer

A)  this represents income from ordinary activities
B)  this is not considered income
C)  this is separate and distinct from sales revenue
D)  this is considered a financing activity

Question 17

Performance obligations relate to:

Accepted Answer

A)  distinct goods or services
B)  input costs of products or services
C)  customer payment terms
D)  the transaction price

Question 18

Under ASPE,when revenue is earned from the sale of goods under the earnings based approach,all of the following criteria must be met before revenue can be recognized except

Accepted Answer

A)  the amount of consideration received can be measured with reasonable assurance.
B)  collection is reasonably assured.
C)  all sales returns and allowances have been recorded.
D)  risks and rewards of ownership have been transferred to the customer.

Question 19

In retail stores,revenue is normally recognized at the time of sale.

Accepted Answer

A) True 
 B)False

Question 20

A contract has commercial substance when the risk,timing,or amount of
the company's future cash flows is expected to change as a result of the contract.

Accepted Answer

A) True 
 B)False

Exam 4: Revenue Recognition and the Statement of Income

Revenue recognition approaches differ between IFRS and ASPE.

Correct Answer
verified

The choice of presenting expenses based on their nature or function rests with management.

Correct Answer
verified

Earnings are considered to be of lower quality if

Correct Answer
verified

Correct Answer
verified

Bailey Consulting,a Winnipeg based company that uses the contract-based approach to revenue recognition,has just signed a contract to complete a strategic plan for a local business.The five-step model Bailey Consulting should follow to recognize revenue should include all of the following,except for

Correct Answer
verified

Performance obligations relate to:

Correct Answer
verified

When following ASPE,all of the following criteria must be satisfied in order to recognize revenue for the provision of services,under the earnings based approach,except

Correct Answer
verified

Correct Answer
verified

The contract-based approach to revenue recognition must be used under:

Correct Answer
verified

Under ASPE,when revenue is earned from the sale of goods under the earnings based approach,all of the following criteria must be met before revenue can be recognized except

Correct Answer
verified

Private companies must report comprehensive income in their financial statements.

Correct Answer
verified

Melanie purchases an new Honda Civic.During the negotiations the sales representative gives her the opportunity to purchase a 10-year bumper to bumper warranty.This is referred to as a(n) :

Correct Answer
verified

Correct Answer
verified

Under IFRS,companies offering sales discounts must adjust the original amount of the sales revenue by the expected sales discount.

Correct Answer
verified

If a company generates gains,

Correct Answer
verified

With consignment arrangements

Correct Answer
verified

The amount of revenue is one of the most significant amounts reported in the financial statements.

Correct Answer
verified

A contract has commercial substance when the risk,timing,or amount of the company's future cash flows is expected to change as a result of the contract.

Correct Answer
verified

In retail stores,revenue is normally recognized at the time of sale.

Correct Answer
verified

EPS may be reported either on the statement of financial position or the statement of income.

Correct Answer
verified

Exam 4: Revenue Recognition and the Statement of Income

Revenue recognition approaches differ between IFRS and ASPE.

Correct AnswerverifiedShow Answer

The choice of presenting expenses based on their nature or function rests with management.

Correct AnswerverifiedShow Answer

Earnings are considered to be of lower quality if

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Performance obligations relate to:

Correct AnswerverifiedShow Answer

When following ASPE,all of the following criteria must be satisfied in order to recognize revenue for the provision of services,under the earnings based approach,except

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The contract-based approach to revenue recognition must be used under:

Correct AnswerverifiedShow Answer

Under ASPE,when revenue is earned from the sale of goods under the earnings based approach,all of the following criteria must be met before revenue can be recognized except

Correct AnswerverifiedShow Answer

Private companies must report comprehensive income in their financial statements.

Correct AnswerverifiedShow Answer

Melanie purchases an new Honda Civic.During the negotiations the sales representative gives her the opportunity to purchase a 10-year bumper to bumper warranty.This is referred to as a(n) :

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Under IFRS,companies offering sales discounts must adjust the original amount of the sales revenue by the expected sales discount.

Correct AnswerverifiedShow Answer

If a company generates gains,

Correct AnswerverifiedShow Answer

With consignment arrangements

Correct AnswerverifiedShow Answer

The amount of revenue is one of the most significant amounts reported in the financial statements.

Correct AnswerverifiedShow Answer

A contract has commercial substance when the risk,timing,or amount of the company's future cash flows is expected to change as a result of the contract.

Correct AnswerverifiedShow Answer

In retail stores,revenue is normally recognized at the time of sale.

Correct AnswerverifiedShow Answer

EPS may be reported either on the statement of financial position or the statement of income.

Correct AnswerverifiedShow Answer

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