Exam 8: Revenue Recognition

Companies provide information about performance obligations in contracts with customers, including information about ________.

The first step in the revenue recognition process is to determine the transaction price.

Camey Construction enters into a long-term fixed price contract to build an office building for $5,000,000. In the first year of the contract Camey incurs $1,400,000 of cost and the engineers determined that the remaining costs to complete the project are $2,500,000. Camey billed $4,000,000 and collected $1,000,000 in year 1. Refer to Camey Construction. How much gross profit should Camey recognize in Year 1 assuming the use of the percentage of completion method? (Round any intermediary percentages to the nearest hundredth percent, and round your final answer to the nearest whole dollar.)

A seller recognizes the amount of returns from right to return sales as a(n) ________.

Kramer Iron Works Kramer Iron Works signs a contract to provide three different products to a customer for a total transaction price of $325,000. Each product represents a separate performance obligation. Kramer 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. Market Standalone Competition Forecasted Product Selling Price Price Cost A-1 \ 87,500 \ 66,500 \ 60,000 A-2 150,000 156,000 125,000 A-3 Not Available Total \ 322,500 \ 250,00 -Refer to Kramer Iron Works. Allocate the transaction price using the residual approach.

Walker Consulting helped McCall Roofers put various cost saving techniques into place. The contract specifies that Walker will receive a flat fee of $70,000 and an additional $17,000 if McCall attains a target amount of cost savings. Walker estimates a 20% chance that McCall will reach the target for cost savings. Assuming that Walker uses the expected-value approach, what is the transaction price for this product?

What happens to the Construction in Progress account and the Billings on Construction in Progress accounts upon completion of a long-term contract?

The percentage-of-completion method may utilize a cost-to-cost approach or an output measure approach.

What is a consignment sale?

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

What are the conditions that must be met in order for the seller to recognize revenue?

Under the completed-contract method, the firm only reports profit in the final year of the contract.

Under the completed-contract method, revenue is recognized ________.

Tullis Construction enters into a long-term fixed price contract to build an office tower for $10,700,000. In the first year of the contract Tullis incurs $2,100,000 of cost and the engineers determined that the remaining costs to complete the project are $4,900,000. Tullis billed $4,000,000 in year 1 and collected $3,500,000 by the end of the end of the year. How much gross profit should Tullis recognize in Year 1 assuming the use of the completed-contract method?

Companies provide information in only one major area with regard to revenues and that is information about its contracts with customers.

A good or service transferred at a point in time would include a ________.

Fare Jewelry Company is holding goods on consignment from Tomko with a selling price of $4,000,000. Fare is promised a commission of 25% for goods sold. By the end of 2019 Fare has sold $600,000 of Tomko's goods. Refer to Fare Jewelry. How much revenue should Fare recognize for 2019 on this transaction?

Hopner Products enters into a contract with Tulles to sell three different products. Each of the products is a separate performance obligation. Based on the information presented in the table, what is the standalone price of product Z using the residual approach? Transaction Price $415,000 X \ 150,000 Y \ 125,000 Z Not Available

ABC Company is holding goods with a selling price of $110,000 which cost them $70,000. On December 3, 2019, ABC sold the goods to Timmons under a bill-and-hold arrangement. At the end of 2019 ABC still holds the goods. Assume ABC meets the four conditions necessary under a bill-and-hold arrangement to claim it has transferred control to the buyer. How much revenue should ABC recognize for 2019?

Hill and Dale Enterprises offers a promotion that provides a customer signing up for a membership the opportunity to enroll in educational courses. A customer signing up the first time is entitled to a 25% discount off a full year 's worth of courses. A new membership costs $1,600 annually and a year's worth of courses another $1,200. Hill and Dale estimate that approximately 40% of the customers will take advantage of the 25% discount. The company is offering a 10% discount on all courses at this time. Required: a. Identify the separate performance obligations in the new customer deal. b. Allocate the price to the separate performance obligations. Use the most-likely amount approach. c. Record the journal entry to record the sale of a new membership and one year of courses. The customer paid cash.