Question 1

When using the cost recovery method of accounting for long-term construction contracts under IFRS:

Accepted Answer

A) Estimated losses on the overall contract are recognized before the contract is completed. 
B) Expenses are recorded each period,but revenue is only recognized when the contract is completed. 
C) Companies can use the percentage-of-completion method if that is their preference. 
D) Neither gains nor losses are recognized until the contract is completed. 
A) Estimated losses on the overall contract are recognized before the contract is completed. 
B) Expenses are recorded each period,but revenue is only recognized when the contract is completed. 
C) Companies can use the percentage-of-completion method if that is their preference. 
D) Neither gains nor losses are recognized until the contract is completed.

Question 2

On February 1st,H&B Bank originated a loan for $50,000 at an interest rate of 7.2%.On March 15th,an interest payment of $300 was received.Which of the following best describes when interest revenue should be recognized?

Accepted Answer

A) At a point in time (February 1st) 
B) At a point in time (March 15th) 
C) At a point in time (March 31st) 
D) Over time 
A) At a point in time (February 1st) 
B) At a point in time (March 15th) 
C) At a point in time (March 31st) 
D) Over time

Question 3

An option for a customer to purchase additional goods at a discount from list price is always a performance obligation,because it confers a material right.

Accepted Answer

A) True 
 B)False

Question 4

Revenue likely is recognized over time for all the following arrangements except for

Accepted Answer

A) Bank earning interest on a long term loan 
B) Construction of a building 
C) Providing a two-year gym membership 
D) Manufacturing generally stocked items ordered by a favored customer 
A) Bank earning interest on a long term loan 
B) Construction of a building 
C) Providing a two-year gym membership 
D) Manufacturing generally stocked items ordered by a favored customer

Question 5

Which of the following is not true about contract liabilities?

Accepted Answer

A) Contract liabilities are only recognized when the seller has a conditional right to receive payment. 
B) Contract liabilities might be called deferred revenue. 
C) Contract liabilities are recognized when the seller has been paid in advance of satisfying its performance obligations. 
D) Contract liabilities may be shown on a separate line of the balance sheet. 
A) Contract liabilities are only recognized when the seller has a conditional right to receive payment. 
B) Contract liabilities might be called deferred revenue. 
C) Contract liabilities are recognized when the seller has been paid in advance of satisfying its performance obligations. 
D) Contract liabilities may be shown on a separate line of the balance sheet.

Question 6

Briefly explain how a company that recognized revenue over time by estimating percentage of completion using a cost-to-cost ratio could manage earnings upward to meet a profit projection.What sort of ethical problems could result from that earnings management?

Accepted Answer

A company could understate its total est

Question 7

If the seller is a principal,the seller typically is vulnerable to risks associated with collecting payment from the customer.

Accepted Answer

A) True 
 B)False

Question 8

In a bill-and-hold arrangement,revenue only can be recognized after the sale of the goods to the end user.

Accepted Answer

A) True 
 B)False

Question 9

Slick's Used Cars sells pre-owned cars on the installment basis and carries its own notes because its customers typically cannot qualify for a bank loan.Default rates tend to be high or unpredictable.However,in the event of nonpayment,Slick's can usually repossess the cars without loss.The revenue method Slick would use is the:

Accepted Answer

A) Installment sales method. 
B) Point of sales method. 
C) Cost recovery method. 
D) Installment sales method or cost recovery method. 
A) Installment sales method. 
B) Point of sales method. 
C) Cost recovery method. 
D) Installment sales method or cost recovery method.

Question 10

Vendor-specific objective evidence of separate sales prices is required for multiple-element software contracts,but estimated selling prices can be used for other multiple-element contracts under U.S.GAAP.

Accepted Answer

A) True 
 B)False

Question 11

Use the following to answer questions 
Sahara Desert Homes (SDH)reports under IFRS and constructed a new subdivision during 2015 and 2016 under contract with Cactus Development Co.Relevant data are summarized below:
   SDH uses the cost recovery method under IFRS to recognize revenue.
-What is the journal entry in 2015 to record revenue?

Accepted Answer

The answer of Use the following to answer questions 
Sahara...

Question 12

Briefly explain how you can determine if a company is effectively using leverage.

Accepted Answer

A company is successfully usin

Question 13

Which of the following is not a characteristic of a distinct good or service?

Accepted Answer

A) It can be used on its own or in combination with other goods or services the seller could obtain elsewhere 
B) It is not highly dependent on other goods or services in the contract 
C) It has a stand-alone selling price 
D) It is not interrelated with other goods or services in the contract 
A) It can be used on its own or in combination with other goods or services the seller could obtain elsewhere 
B) It is not highly dependent on other goods or services in the contract 
C) It has a stand-alone selling price 
D) It is not interrelated with other goods or services in the contract

Question 14

Use the following to answer questions 
Excerpts from Dowling Company's December 31,2016 and 2015,financial statements and key ratios are presented below (all numbers are in millions):
  
-Dowling's average total assets for 2016 is (rounded):

Accepted Answer

A) 32. 
B) 210. 
C) 115. 
D) 194. 
A) 32. 
B) 210. 
C) 115. 
D) 194.

Question 15

If the contract contains multiple performance obligations,revenue must be recognized in an amount equal to the fair value of each of the separate performance obligations.

Accepted Answer

A) True 
 B)False

Question 16

In 2015,Reliable would recognize gross profit of:

Accepted Answer

A) $0. 
B) $25,000. 
C) $ 8,090. 
D) $ 8,333. 
A) $0. 
B) $25,000. 
C) $ 8,090. 
D) $ 8,333.

Question 17

AgriFoods,Inc.prepares and delivers agricultural products to industrial-scale kitchens and food service providers.One of its key customers is Home Kitchen & Co. ,which provides cafeteria solutions for corporations and universities.On January 1,2016,AgriFoods obtained a one-year contract to supply a pre-specified amount of vegetables to Home Kitchen,and received $600,000 in cash.Then,on March 15,AgriFoods hired Home to run one of its employee cafeterias for a period of six months,from April to September,and paid $70,000 in cash.For similar arrangements,Home usually charged $50,000.
Required: (a)Prepare the journal entries AgriFoods would record on January 1,2016 and January 31,2016 with respect to the sales contract.Assume revenue is accrued on a monthly basis.(b)Prepare the journal entry to account for AgriFoods' purchase of Home's services.

Accepted Answer

Part a)AgriFoods would record deferred r

Question 18

A warranty that the customer can purchase separately and that covers a long period of time after the purchase date is likely to be a quality-assurance warranty.

Accepted Answer

A) True 
 B)False

Question 19

The amount of revenue that GAAP,regarding software revenue recognition,would require Sullivan to attribute to the software program (as opposed to the technical support)is (rounded):

Accepted Answer

A) $450. 
B) $475. 
C) $432. 
D) $400. 
A) $450. 
B) $475. 
C) $432. 
D) $400.

Question 20

If the seller is a principal,the seller typically is not vulnerable to risks associated with delivering the product or service.

Accepted Answer

A) True 
 B)False

When using the cost recovery method of accounting for long-term construction contracts under IFRS:

On February 1^st,H&B Bank originated a loan for $50,000 at an interest rate of 7.2%.On March 15^th,an interest payment of $300 was received.Which of the following best describes when interest revenue should be recognized?

An option for a customer to purchase additional goods at a discount from list price is always a performance obligation,because it confers a material right.

Revenue likely is recognized over time for all the following arrangements except for

Which of the following is not true about contract liabilities?

Briefly explain how a company that recognized revenue over time by estimating percentage of completion using a cost-to-cost ratio could manage earnings upward to meet a profit projection.What sort of ethical problems could result from that earnings management?

If the seller is a principal,the seller typically is vulnerable to risks associated with collecting payment from the customer.

In a bill-and-hold arrangement,revenue only can be recognized after the sale of the goods to the end user.

Vendor-specific objective evidence of separate sales prices is required for multiple-element software contracts,but estimated selling prices can be used for other multiple-element contracts under U.S.GAAP.

Briefly explain how you can determine if a company is effectively using leverage.

Which of the following is not a characteristic of a distinct good or service?

Use the following to answer questions Excerpts from Dowling Company's December 31,2016 and 2015,financial statements and key ratios are presented below (all numbers are in millions): -Dowling's average total assets for 2016 is (rounded):

If the contract contains multiple performance obligations,revenue must be recognized in an amount equal to the fair value of each of the separate performance obligations.

In 2015,Reliable would recognize gross profit of:

A warranty that the customer can purchase separately and that covers a long period of time after the purchase date is likely to be a quality-assurance warranty.

The amount of revenue that GAAP,regarding software revenue recognition,would require Sullivan to attribute to the software program (as opposed to the technical support)is (rounded):

If the seller is a principal,the seller typically is not vulnerable to risks associated with delivering the product or service.

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, comprehensive Income, and the Statement of Cash Flows

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Inventories: Additional Issues

Property, plant, and Equipment and Intangible Assets: Acquisition and Disposition

Property, plant, and Equipment and Intangible Assets: Utilization and Impairment

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes

The Statement of Cash Flows

Filters

Exam 5: Income Measurement

When using the cost recovery method of accounting for long-term construction contracts under IFRS:

On February 1st,H&B Bank originated a loan for $50,000 at an interest rate of 7.2%.On March 15th,an interest payment of $300 was received.Which of the following best describes when interest revenue should be recognized?

An option for a customer to purchase additional goods at a discount from list price is always a performance obligation,because it confers a material right.

Revenue likely is recognized over time for all the following arrangements except for

Which of the following is not true about contract liabilities?

Briefly explain how a company that recognized revenue over time by estimating percentage of completion using a cost-to-cost ratio could manage earnings upward to meet a profit projection.What sort of ethical problems could result from that earnings management?

If the seller is a principal,the seller typically is vulnerable to risks associated with collecting payment from the customer.

In a bill-and-hold arrangement,revenue only can be recognized after the sale of the goods to the end user.

Vendor-specific objective evidence of separate sales prices is required for multiple-element software contracts,but estimated selling prices can be used for other multiple-element contracts under U.S.GAAP.

Briefly explain how you can determine if a company is effectively using leverage.

Which of the following is not a characteristic of a distinct good or service?

Use the following to answer questions Excerpts from Dowling Company's December 31,2016 and 2015,financial statements and key ratios are presented below (all numbers are in millions): -Dowling's average total assets for 2016 is (rounded):

If the contract contains multiple performance obligations,revenue must be recognized in an amount equal to the fair value of each of the separate performance obligations.

In 2015,Reliable would recognize gross profit of:

A warranty that the customer can purchase separately and that covers a long period of time after the purchase date is likely to be a quality-assurance warranty.

The amount of revenue that GAAP,regarding software revenue recognition,would require Sullivan to attribute to the software program (as opposed to the technical support)is (rounded):

If the seller is a principal,the seller typically is not vulnerable to risks associated with delivering the product or service.

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, comprehensive Income, and the Statement of Cash Flows

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Inventories: Additional Issues

Property, plant, and Equipment and Intangible Assets: Acquisition and Disposition

Property, plant, and Equipment and Intangible Assets: Utilization and Impairment

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes

The Statement of Cash Flows

Filters

On February 1^st,H&B Bank originated a loan for $50,000 at an interest rate of 7.2%.On March 15^th,an interest payment of $300 was received.Which of the following best describes when interest revenue should be recognized?