Question 1

Unconditional rights to receive consideration because a performance obligation has been satisfied are

Accepted Answer

A)  reported as a receivable on the statement of financial position.
B)  reported as a contract asset on the statement of financial position.
C)  reported as a contract liability on the statement of financial position.
D)  are not reported on the balance sheet.

Question 2

Disclosure related to revenue

Accepted Answer

A)  does not require capitalized costs to obtain and fulfill a contract.
B)  does not require judgments that affect amount and timing of revenues from contracts.
C)  requires disclosure of remaining performance obligations.
D)  requires disclosure of average balance of contract assets.

Question 3

When a company sells a product but gives the buyer the right to return it, revenue should not be recognized until the sale is collected.

Accepted Answer

A) True 
 B)False  False

Question 4

All revenue for franchise companies is derived from

Accepted Answer

A)  assistance for site selection and negotiating lease.
B)  bookkeeping and advisory services.
C)  sale of initial franchise and continuing fees.
D)  advertising and promotion.

Question 5

A loss in the current period on a profitable contract must be recognized under both the percentage-of-completion and cost-recovery method.

Accepted Answer

A) True 
 B)False

Question 6

A contract liability is a company's obligation to transfer goods or services to a customer for which the company has received consideration from the customer.

Accepted Answer

A) True 
 B)False

Question 7

New Age Computers manufactures and sells pagers and radio paging systems which include a 180 day warranty on product defects.It also sells an extended warranty which provides an additional two years of protection.On May 10, it sold a paging system for $3,850 and an extended warranty for another $1,200.The journal entry to record this transaction would include

Accepted Answer

A)  a credit to Service Revenue of $5,050.
B)  a credit to Service Revenue of $1,200
C)  a credit to Sales of $3,850 and a credit to Service Revenue of $1,200
D)  a credit to Unearned Service Revenue of $1,200.

Question 8

A performance obligation exists when

Accepted Answer

A)  a company receives the right to receive consideration.
B)  a contract is approved and signed.
C)  a company provides a distinct product or service.
D)  a company provides interdependent product or service. C

Question 9

The new revenue recognition standard adopted a liability approach as the basis for revenue recognition.

Accepted Answer

A) True 
 B)False

Question 10

Entertainment Tonight, Inc.manufactures and sells stereo systems that include an assurance-type warranty for the first 90 days.Entertainment Tonight also offers an optional extended coverage plan under which it will repair or replace any defective part for 2 years beyond the expiration of the assurance-type warranty.The total transaction price for the sale of the stereo system and the extended warranty is $3,000.The standalone price of each is $2,300 and $800, respectively.The estimated cost of the assurance-warranty is $350.The accounting for warranty will include a

Accepted Answer

A)  debit to Warranty Expense, $800.
B)  debit to Warranty Liability, $350
C)  credit to Warranty Liability, $800
D)  credit to Unearned Warranty Revenue, $800

Question 11

Nonrefundable upfront fees

Accepted Answer

A)  should be recognized immediately upon receipt of payment.
B)  such as activation fees for cable should be recognized as revenue immediately.
C)  such as a one-time initiation fee in a health club should be recognized immediately.
D)  should not be recorded as revenue at the time of payment if they are for future delivery of products and services.

Question 12

The Billings on Construction in Progress account is a(n)

Accepted Answer

A)  contract revenue account.
B)  inventory account.
C)  contra-inventory account.
D)  construction expense account.

Question 13

The third step in the process for revenue recognition is to

Accepted Answer

A)  determine the transaction price.
B)  identify the separate performance obligations in the contract.
C)  allocate transaction price to the separate performance obligations.
D)  recognize revenue when each performance obligation is satisfied.

Question 14

To address inconsistencies and weaknesses, a comprehensive revenue recognition model was developed entitled the

Accepted Answer

A)  Revenue Recognition Principle.
B)  Principle-based Revenue Accounting.
C)  Rules-based Revenue Accounting.
D)  Revenue from Contracts with Customers.

Question 15

Contract liability is a company's obligations to transfer goods or services to a customer for which the company has received consideration from the customer.An example of a contract liability is

Accepted Answer

A)  Prepaid subscription.
B)  Unearned magazine subscription.
C)  Mortgage Payable.
D)  Service Revenue.

Question 16

Noncash consideration should be

Accepted Answer

A)  recognized on the basis of fair value of what is given up.
B)  recognized on the basis of original cost paid by customer.
C)  recognized on the basis of fair value of what is received.
D)  recognized on the basis of fair value of equivalent goods or services.

Question 17

The transaction price

Accepted Answer

A)  excludes discounts, volume rebates, coupons and free products, or services.
B)  is the amount of consideration that a company expects to receive from a customer
C)  excludes time value of money if the contract involves a significant financing component.
D)  does not consider noncash consideration such as donations, gifts, equipment or labor.

Question 18

Types of franchising arrangements include all of the following except

Accepted Answer

A)  service sponsor-retailer.
B)  wholesaler-service sponsor.
C)  manufacturer-wholesaler.
D)  wholesaler-retailer.

Question 19

The cost-to-cost basis measures progress towards completion by

Accepted Answer

A)  comparing costs incurred to date with total costs to complete the contract.
B)  tracking results of work completed to date; it is an output measure.
C)  tracking floors of a building completed versus floors still to be completed.
D)  tracking miles of a highway completed versus miles of highway still to be completed. A

Question 20

Companies can use the expected value to estimate variable consideration when

Accepted Answer

A)  the contract has only two possible outcomes.
B)  a company has a small number of contracts with similar characteristics.
C)  a company can use the most likely amount in a range of possible outcomes.
D)  a company has a large number of contracts with similar characteristics.

Exam 18: Revenue Recognition

Unconditional rights to receive consideration because a performance obligation has been satisfied are

Correct Answer
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Disclosure related to revenue

Correct Answer
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When a company sells a product but gives the buyer the right to return it, revenue should not be recognized until the sale is collected.

Correct Answer
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False

All revenue for franchise companies is derived from

Correct Answer
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A loss in the current period on a profitable contract must be recognized under both the percentage-of-completion and cost-recovery method.

Correct Answer
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A contract liability is a company's obligation to transfer goods or services to a customer for which the company has received consideration from the customer.

Correct Answer
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A performance obligation exists when

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C

The new revenue recognition standard adopted a liability approach as the basis for revenue recognition.

Correct Answer
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Nonrefundable upfront fees

Correct Answer
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The Billings on Construction in Progress account is a(n)

Correct Answer
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The third step in the process for revenue recognition is to

Correct Answer
verified

To address inconsistencies and weaknesses, a comprehensive revenue recognition model was developed entitled the

Correct Answer
verified

Contract liability is a company's obligations to transfer goods or services to a customer for which the company has received consideration from the customer.An example of a contract liability is

Correct Answer
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Noncash consideration should be

Correct Answer
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The transaction price

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Types of franchising arrangements include all of the following except

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The cost-to-cost basis measures progress towards completion by

Correct Answer
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A

Companies can use the expected value to estimate variable consideration when

Correct Answer
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Exam 18: Revenue Recognition

Unconditional rights to receive consideration because a performance obligation has been satisfied are

Correct AnswerverifiedShow Answer

Disclosure related to revenue

Correct AnswerverifiedShow Answer

When a company sells a product but gives the buyer the right to return it, revenue should not be recognized until the sale is collected.

Correct AnswerverifiedFalse

All revenue for franchise companies is derived from

Correct AnswerverifiedShow Answer

A loss in the current period on a profitable contract must be recognized under both the percentage-of-completion and cost-recovery method.

Correct AnswerverifiedShow Answer

A contract liability is a company's obligation to transfer goods or services to a customer for which the company has received consideration from the customer.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A performance obligation exists when

Correct AnswerverifiedC

The new revenue recognition standard adopted a liability approach as the basis for revenue recognition.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Nonrefundable upfront fees

Correct AnswerverifiedShow Answer

The Billings on Construction in Progress account is a(n)

Correct AnswerverifiedShow Answer

The third step in the process for revenue recognition is to

Correct AnswerverifiedShow Answer

To address inconsistencies and weaknesses, a comprehensive revenue recognition model was developed entitled the

Correct AnswerverifiedShow Answer

Contract liability is a company's obligations to transfer goods or services to a customer for which the company has received consideration from the customer.An example of a contract liability is

Correct AnswerverifiedShow Answer

Noncash consideration should be

Correct AnswerverifiedShow Answer

The transaction price

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Types of franchising arrangements include all of the following except

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The cost-to-cost basis measures progress towards completion by

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Companies can use the expected value to estimate variable consideration when

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C

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A

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