Question 1

The right of return represents a separate performance obligation.

Accepted Answer

A) True 
 B)False

Question 2

Under U.S. GAAP, when a contract meets the collectibility criterion, this means ________.

Accepted Answer

A)  the seller believes it is 50% likely to collect the consideration in the contract 
B)  the seller believes it is more likely than not to collect the consideration in the contract 
C)  the seller believes it is likely to collect the consideration in the contract 
D)  the seller believes it is unlikely to collect the consideration in the contract 
A)  the seller believes it is 50% likely to collect the consideration in the contract 
B)  the seller believes it is more likely than not to collect the consideration in the contract 
C)  the seller believes it is likely to collect the consideration in the contract 
D)  the seller believes it is unlikely to collect the consideration in the contract

Question 3

Costanzo Auto Shop
Costanzo Auto Shop signs a contract to provide three different products to a customer for a total transaction price of $975,000. Each product represents a separate performance obligation. Costanzo only sells two of the three products on an individual basis so they must estimate the standalone selling price for the third product. The information about these three products is provided in the following table.
 $\begin{array}{cccc}
&&\text { Market }\
&\text { Standalone }&\text {Competition }&\text {Forecasted }\
\underline{\text { Product} } &\underline{ \text { Selling Price }} & \underline{\text { Price }} & \underline{\text { Cost }} \
\text { Zoom-1 } & \$ 262,500 & \$ 199,500 & \$ 180,000 \
\text { Zoom-2 } & 450,000 & 468,000 & 375,000 \
 \text { Zoom-3  } & \text { Not Available } & \underline{300,000} & \underline{195,000} \
\quad \text { Total } &&7950,000 &  \$ 67,500 &
\end{array}$

-Refer to Costanzo Auto Shop. Allocate the transaction price using the residual approach.

Accepted Answer

\[\begin{array} { | c | c | } 
\hline \t

Question 4

If a seller receives cash before the appropriate time to recognize revenue, the seller should treat the consideration as a liability.

Accepted Answer

A) True 
 B)False

Question 5

Approval of a contract by the parties must be in writing.

Accepted Answer

A) True 
 B)False

Question 6

Louise paints seascapes and landscapes. In 2019 she placed nine of her most prized paintings with the Wainwright Studio Gallery. The paintings each carried a price of $6,000, and Louise made a deal with the Gallery to pay them a 40% commission on all paintings sold. At the end of the year, three paintings had been sold. How much revenue will Louise recognize on each of the consignment sales?

Accepted Answer

A)  $6,000 
B)  $3,600 
C)  $2,400 
D)  $0 
A)  $6,000 
B)  $3,600 
C)  $2,400 
D)  $0

Question 7

Derby Company sells season passes to its entertainment center. The passes sell for $85 each and are good for the year. On January 1, Derby sells 3,000 passes and received cash. The amount of revenue to be recognized on January 1 is ________.

Accepted Answer

A)  $0 
B)  $127,500 
C)  $255,000 
D)  $21,250 
A)  $0 
B)  $127,500 
C)  $255,000 
D)  $21,250

Question 8

Companies may choose the method used to disaggregate revenues when disclosing information about revenues.

Accepted Answer

A) True 
 B)False

Question 9

ABC provides a product and installation to be used in conjunction with the buyer's production system. The buyer's system is unusable without ABC's product. The product and the installation are an example of ________.

Accepted Answer

A)  three performance obligations 
B)  no performance obligations 
C)  a single performance obligation 
D)  two performance obligations 
A)  three performance obligations 
B)  no performance obligations 
C)  a single performance obligation 
D)  two performance obligations

Question 10

Jones Corporation enters into a contract with Warner Video to add their programs to Jones' network. Warner will pay Jones an upfront fixed fee of $250,000 for 12 months of access, and will also pay a $100,000 bonus if Jones' users access Warner Video for at least 10,000 hours during the 12 month period. Jones estimates that it has a 60% chance of earning the $100,000 bonus. Ignore any constraints on variable consideration. Refer to Jones Corporation. Using the expected-value approach, the transaction price would be ________.

Accepted Answer

A)  $150,000 
B)  $250,000 
C)  $310,000 
D)  $350,000 
A)  $150,000 
B)  $250,000 
C)  $310,000 
D)  $350,000

Question 11

Pemco Enterprises sells annual memberships to its shooting lodge. The memberships cost $210 each. On January 1, Pemco sold 2,000 memberships and received cash. Refer to Pemco Enterprises. How much revenue should Pemco recognize on January 1?

Accepted Answer

A)  $0 
B)  $420,000 
C)  $210,000 
D)  $35,000 
A)  $0 
B)  $420,000 
C)  $210,000 
D)  $35,000

Question 12

If the sum of standalone selling prices is greater than the transaction price, then any discount should be allocated to the performance obligations based on the relative ________.

Accepted Answer

A)  historical cost 
B)  standalone selling prices 
C)  book values 
D)  net present values 
A)  historical cost 
B)  standalone selling prices 
C)  book values 
D)  net present values

Question 13

Define the term "commercial substance."

Accepted Answer

A contract is said to have com

Question 14

ABC Company enters into a contract with Edmond Library to help them streamline their purchasing process. The contract specifies that Edmond Library will pay ABC $90,000 in the form of a fixed fee plus an additional $10,000 if the library achieves $200,000 in cost savings. ABC estimates a 55% chance that the library will achieve a $200,000 savings. Assume ABC estimates that the transaction price is the expected-value transaction price. The transaction price is recorded as ________. Ignore any constraints on variable consideration.

Accepted Answer

A)  $90,000 
B)  $95,500 
C)  $100,000 
D)  $84,500 
A)  $90,000 
B)  $95,500 
C)  $100,000 
D)  $84,500

Question 15

The transaction price is the amount of consideration the entity expects to be entitled to as a result of providing goods or services to the customer.

Accepted Answer

A) True 
 B)False

Question 16

Explain the similarities and differences between the two methods of accounting for long-term contracts.

Accepted Answer

The two methods for accounting for long-

Question 17

A financing component is accounted for separately in a sales contract if delivery occurs in advance of payment or payment occurs in advance of delivery by more than ________.

Accepted Answer

A)  six months 
B)  one year 
C)  two years 
D)  three years 
A)  six months 
B)  one year 
C)  two years 
D)  three years

Question 18

The local Mini Mart makes cash sales of $8,000 on April 5, 2019. The journal entry to record the transaction would be to ________. The firm uses the periodic inventory system.

Accepted Answer

A)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 8,000 & \
\hline \text { Sales Revenue } & & 8,000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | l | l | } 
\hline \text { Sales Revenue } & 8,000 & \
\hline \text { Cash } & & 8,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | l | l | } 
\hline \text { Accounts Receivable } & 8,000 & \
\hline \text { Sales Revenue } & & 8,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 8,000 & \
\hline \text { Accounts Receivable } & & 8,000 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 8,000 & \
\hline \text { Sales Revenue } & & 8,000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | l | l | } 
\hline \text { Sales Revenue } & 8,000 & \
\hline \text { Cash } & & 8,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | l | l | } 
\hline \text { Accounts Receivable } & 8,000 & \
\hline \text { Sales Revenue } & & 8,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 8,000 & \
\hline \text { Accounts Receivable } & & 8,000 \
\hline
\end{array}$$

Question 19

Craft Construction
Craft Construction entered into a contract to construct a generator station for a utility customer. The project was started in 2019 and completed in 2020. Cost and other information is presented below.
 $$\begin{array} { | l | r | c | } 
\hline & \underline { 2019 } & \underline { 2020 } \
\hline \text { Costs incurred during the year } & \$ 225,000 & \$ 550,000 \
\hline \text { Estimated costs to complete } & 450,000 & - 0 - \
\hline \text { Billings during the year } & 200,000 & 700,000 \
\hline \text { Cash collections during the year } & 150,000 & 750,000 \
\hline
\end{array}$$
-Refer to Craft Construction. Assume Craft uses the completed-contract method for revenue recognition. Compute the amount of gross profit for 2019 and 2020.

Accepted Answer

None

Question 20

Greenwell Farm Equipment sells a tractor to Farmer for $40,000 on January 1, 2019. The tractor is delivered that day. Greenwell agrees that the Farmer may delay the payment for 2 years. The market rate of interest is 8%. Refer to Greenwell Farms. How much interest revenue will Greenwell report on January 1, 2019?

Accepted Answer

A)  $43,200 
B)  $36,800 
C)  $0.00 
D)  $3,200 
A)  $43,200 
B)  $36,800 
C)  $0.00 
D)  $3,200

The right of return represents a separate performance obligation.

Under U.S. GAAP, when a contract meets the collectibility criterion, this means ________.

If a seller receives cash before the appropriate time to recognize revenue, the seller should treat the consideration as a liability.

Approval of a contract by the parties must be in writing.

Derby Company sells season passes to its entertainment center. The passes sell for $85 each and are good for the year. On January 1, Derby sells 3,000 passes and received cash. The amount of revenue to be recognized on January 1 is ________.

Companies may choose the method used to disaggregate revenues when disclosing information about revenues.

ABC provides a product and installation to be used in conjunction with the buyer's production system. The buyer's system is unusable without ABC's product. The product and the installation are an example of ________.

Pemco Enterprises sells annual memberships to its shooting lodge. The memberships cost $210 each. On January 1, Pemco sold 2,000 memberships and received cash. Refer to Pemco Enterprises. How much revenue should Pemco recognize on January 1?

If the sum of standalone selling prices is greater than the transaction price, then any discount should be allocated to the performance obligations based on the relative ________.

Define the term "commercial substance."

The transaction price is the amount of consideration the entity expects to be entitled to as a result of providing goods or services to the customer.

Explain the similarities and differences between the two methods of accounting for long-term contracts.

A financing component is accounted for separately in a sales contract if delivery occurs in advance of payment or payment occurs in advance of delivery by more than ________.

The local Mini Mart makes cash sales of $8,000 on April 5, 2019. The journal entry to record the transaction would be to ________. The firm uses the periodic inventory system.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

Filters

Exam 8: Revenue Recognition

The right of return represents a separate performance obligation.

Under U.S. GAAP, when a contract meets the collectibility criterion, this means ________.

If a seller receives cash before the appropriate time to recognize revenue, the seller should treat the consideration as a liability.

Approval of a contract by the parties must be in writing.

Derby Company sells season passes to its entertainment center. The passes sell for $85 each and are good for the year. On January 1, Derby sells 3,000 passes and received cash. The amount of revenue to be recognized on January 1 is ________.

Companies may choose the method used to disaggregate revenues when disclosing information about revenues.

ABC provides a product and installation to be used in conjunction with the buyer's production system. The buyer's system is unusable without ABC's product. The product and the installation are an example of ________.

Pemco Enterprises sells annual memberships to its shooting lodge. The memberships cost $210 each. On January 1, Pemco sold 2,000 memberships and received cash. Refer to Pemco Enterprises. How much revenue should Pemco recognize on January 1?

If the sum of standalone selling prices is greater than the transaction price, then any discount should be allocated to the performance obligations based on the relative ________.

Define the term "commercial substance."

The transaction price is the amount of consideration the entity expects to be entitled to as a result of providing goods or services to the customer.

Explain the similarities and differences between the two methods of accounting for long-term contracts.

A financing component is accounted for separately in a sales contract if delivery occurs in advance of payment or payment occurs in advance of delivery by more than ________.

The local Mini Mart makes cash sales of $8,000 on April 5, 2019. The journal entry to record the transaction would be to ________. The firm uses the periodic inventory system.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

Filters