Exam 8: Revenue Recognition

Disclosures concerning significant judgments include all of the following except ________.

If the standalone price of each performance obligation is known,then the estimate of the selling price should maximize the use of observable inputs.

Refer to Fare Jewelry.How much revenue should Fare recognize for 2017 on this transaction?

Refer to Fare Jewelry.How much revenue should Tomko recognize for 2017 on this transaction?

If the seller does not meet the three criteria for revenue recognition,then it assumes that goods or services are transferred over time.

At the beginning of 2017 Gordo Yachts enters into a contract to build a luxury yacht for a customer that is expected to take three years to complete.The contract price is $4,000,000.Completion is scheduled for the end of 2019.Gordo's year end is December 31.The following is a year by year summary of construction costs incurred and the estimated costs to complete the projects at the end of each year. Compute gross profit for 2017,2018,and 2019 assuming the use of the completed- contract method.

The residual approach of determining a standalone price focuses on internal factors by forecasting costs and adding an appropriate profit margin.

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

Recognition of revenue as each performance obligation is satisfied is which step in the recognition process?

Define the term "commercial substance."

Refer to Costanza Auto Shop.Allocate the transaction price using the adjusted market assessment approach.

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

Journal entries for the percentage-of-completion method are only made at the completion of the project.

Refer to Costanza Auto Shop.Allocate the transaction price using expected-cost-plus-a-margin approach.

Refer to Pemco Enterprises.How much revenue should Pemco recognize on January 1?

Hill and Dale Enterprises offers an 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 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. c.Record the journal entry to record revenue for the sale of a new

Refer to Shady Equipment.How much sales revenue will Shady report on January 1,2016?

Argus sells auto parts.On August 1,a customer purchases parts for $3,900 cash.The parts cost Argus $1,300.Argus uses the perpetual inventory method. Required: Prepare the necessary entries to record the sale.

Macro Tech enters a contract on January 1,2017 to produce software for a customer for $5,000,000.Macro Tech receives $2,000,000 from the customer upon contract signing and the balance at the completion of the contract.According to the contract,the customer controls the system during the creation of the program.Macro Tech estimates that it will take two years to complete the project and uses the number of labor hours to estimate the rate of completion.Macro Tech spends 30,000 hours in the first year of the contract and another 20,000 hours the second year. Required: Prepare the entries recorded by Macro Tech over the life of this contract.Assume that all payments are complete by the end of 2018.

Refer to Novella Company.How should Novella record the receipt of cash on January 1?