Question 1

Under which of the following circumstances is it most appropriate to use the residual method to estimate stand-alone selling prices?

Accepted Answer

A) The seller hasn't previously sold the product and hasn't determined a price for it. 
B) The seller provides the product bundled with other goods and services. 
C) The seller does not have competitors from which to observe market prices of similar products. 
D) The seller is unable to accurately estimate variable consideration associated with the contract. 
A) The seller hasn't previously sold the product and hasn't determined a price for it. 
B) The seller provides the product bundled with other goods and services. 
C) The seller does not have competitors from which to observe market prices of similar products. 
D) The seller is unable to accurately estimate variable consideration associated with the contract.

Question 2

In 2016,Chicago Construction began work on a three-year construction project to build a new performing arts complex (the PAC).The PAC contract price is $150 million.Chicago recognizes revenue on this contract over time according to percentage of completion.At the end of 2016,the following financial statement information indicates the results to date for the PAC (missing items denoted by letter):
   
Required: Compute the following,placing your answer in the spaces provided and showing supporting computations below:

Accepted Answer

The answer of In 2016,Chicago Construction began work on a...

Question 3

A company is effectively leveraging when:

Accepted Answer

A) The return on assets exceeds the return on shareholders' equity. 
B) The return on shareholders' equity exceeds the return on assets. 
C) The return on shareholders' equity is increasing. 
D) The return on assets is increasing. 
A) The return on assets exceeds the return on shareholders' equity. 
B) The return on shareholders' equity exceeds the return on assets. 
C) The return on shareholders' equity is increasing. 
D) The return on assets is increasing.

Question 4

Mammoth Publishing,Inc.owns a weekly magazine called "Nova Health," and sells annual subscriptions for $96.Customers prepay their subscription fee and receive 52 issues starting in the following month.The company also offers new subscribers a 25% discount coupon on its other weekly magazine called "Fishing & Camping," which has a list price of $84 for an annual subscription.Mammoth estimates that approximately 10% of the discount coupons will be redeemed.
Required:
(a)How many performance obligations are in a single subscription contract? Explain the reasons for your answer.
(b)Prepare the journal entry to account for one new subscription of "Nova Health," clearly identifying the revenue or deferred revenue associated with each performance obligation.

Accepted Answer

(a)Number of performance obligations in

Question 5

CompuTime Center sells a full assortment of computer parts,including motherboards,video cards,and cables.It also offers complementary computer assembly services.A customer places an order for an advanced workstation,and CompuTime asks for $3,500.If CompuTime were to sell only the parts in an advanced workstation,with no assembly,the price would be $3,300.
Required: Assuming that computer parts and assembly service are separate performance
obligations,estimate the stand-alone selling price of the assembly service based on the residual
approach.

Accepted Answer

Under the residual approach,CompuTime wo

Question 6

Mary signed up and paid $1200 for a 6 month ceramics course on June 1st with Choplet Ceramics.As of August 1st,Choplet's accounting records would indicate:

Accepted Answer

A) $400 of revenue,$800 of accounts receivable 
B) $400 of revenue,$800 of deferred revenue 
C) $1,200 of revenue,$1,200 of cash 
D) $800 of revenue,$400 of accounts receivable 
A) $400 of revenue,$800 of accounts receivable 
B) $400 of revenue,$800 of deferred revenue 
C) $1,200 of revenue,$1,200 of cash 
D) $800 of revenue,$400 of accounts receivable

Question 7

Use the following to answer questions 
Beavis Construction Company was the low bidder on a construction project to build an earthen dam for $1,800,000.The project was begun in 2015 and completed in 2016.Cost and other data are presented below:
  
-Assume that Beavis recognizes revenue upon completion of the project. Required: Prepare all journal entries to record costs,billings,collections,and profit recognition.

Accepted Answer

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

Question 8

Assuming Brunetti uses the most likely value to estimate the variable consideration,calculate the transaction price.

Accepted Answer

Based on the most likely amoun

Question 9

Which of the following is not a performance obligation?

Accepted Answer

A) A good that the seller could sell separately and that is separately identifiable from other goods and services in the contract. 
B) A right of return. 
C) An option for a customer to purchase goods under terms that are more advantageous than those enjoyed by other customers. 
D) An extended warranty. 
A) A good that the seller could sell separately and that is separately identifiable from other goods and services in the contract. 
B) A right of return. 
C) An option for a customer to purchase goods under terms that are more advantageous than those enjoyed by other customers. 
D) An extended warranty.

Question 10

In franchise arrangements,the franchisor's performance obligations are not separately identifiable,so revenue must be recognized over time.

Accepted Answer

A) True 
 B)False

Question 11

Are sellers ever constrained from including variable consideration in the transaction price used to estimate revenue? Explain,providing indicators of circumstances that could require that constraint.

Accepted Answer

Sellers only include an estimate of vari

Question 12

A contract does not exist for purposes of applying the revenue recognition principle in all of the following cases except for when:

Accepted Answer

A) The seller believes it is not probable that it will collect the amount it's entitled to receive under the contract. 
B) The seller and buyer did not sign a formalized written contract. 
C) The seller and buyer can terminate the contract without penalty and neither has performed any obligations under the contract. 
D) The seller believes it is highly likely but not certain that the buyer will agree to the terms of the contract. 
A) The seller believes it is not probable that it will collect the amount it's entitled to receive under the contract. 
B) The seller and buyer did not sign a formalized written contract. 
C) The seller and buyer can terminate the contract without penalty and neither has performed any obligations under the contract. 
D) The seller believes it is highly likely but not certain that the buyer will agree to the terms of the contract.

Question 13

When accounting for revenue over time for a long-term contract,the percentage of completion used to recognize revenue in the first year usually is determined by measuring:

Accepted Answer

A) Costs incurred in the first year,divided by estimated remaining costs to complete the project. 
B) Costs incurred in the first year,divided by estimated total costs for the completed project. 
C) Costs incurred in the first year,divided by estimated gross profit. 
D) Costs incurred in the first year,divided by estimated total costs to be incurred in the remaining years of the project. 
A) Costs incurred in the first year,divided by estimated remaining costs to complete the project. 
B) Costs incurred in the first year,divided by estimated total costs for the completed project. 
C) Costs incurred in the first year,divided by estimated gross profit. 
D) Costs incurred in the first year,divided by estimated total costs to be incurred in the remaining years of the project.

Question 14

Orange Inc.offers a discount on an extended warranty on its oPhone when the warranty is purchased at the time the oPhone is purchased.The warranty normally has a price of $150,but Orange offers it for $120 when purchased along with an oPhone.Orange anticipates a 75% chance that a customer will purchase the extended warranty along with the oPhone.Assume Orange sells to 1,000 oPhones with the extended warranty discount offer.What is the total stand-alone selling price that Orange would use for the extended warranty discount option for purposes of allocating revenue among the performance obligations in those 1,000 oPhone contracts?

Accepted Answer

A) $0 
B) $22,500 
C) $30,000 
D) $120,000 
A) $0 
B) $22,500 
C) $30,000 
D) $120,000

Question 15

Stayman Associates has sold a good to a buyer and wants to recognize revenue.Which of the following is an indicator that control of a good has passed from Stayman to the buyer?

Accepted Answer

A) Buyer has scheduled delivery. 
B) Buyer has a strong credit history,such that bad debts are reasonably estimable. 
C) Buyer has not scheduled delivery. 
D) Buyer has assumed the risk and rewards of ownership. 
A) Buyer has scheduled delivery. 
B) Buyer has a strong credit history,such that bad debts are reasonably estimable. 
C) Buyer has not scheduled delivery. 
D) Buyer has assumed the risk and rewards of ownership.

Question 16

Use the following to answer questions 
The following table presents a summary of ratio analysis for Uncle Joe's Coffee,based on the most recent 12 months and five-year comparisons of Uncle Joe's with averages in the restaurant industry and the services sector,respectively.
  
-What limitations exist in drawing meaningful comparisons about the performance of Uncle Joe's from the data above?

Accepted Answer

There is a wide array of businesses in t

Question 17

Moretti Department Store sells gift cards that expire three years from the date of purchase.During 2014,Moretti sold $50,000 of gift cards,of which $1,500 were redeemed during 2016.At the end of 2016,it is estimated that approximately $800 of the 2014 balance remains unused,and Moretti concludes that it will never be redeemed.Moretti sold another $55,000 of gift cards in 2015,of which $22,000 were redeemed in 2016,and $60,000 of gift cards in 2016,of which $40,000 were redeemed in 2016. Required: How much revenue with respect to gift cards should Moretti recognize in 2016?

Accepted Answer

Moretti should recognize revenue only to

Question 18

Use the following to answer questions 
Beavis Construction Company was the low bidder on a construction project to build an earthen dam for $1,800,000.The project was begun in 2015 and completed in 2016.Cost and other data are presented below:
  
-Assume that Beavis recognizes revenue upon completion of the project.
Required: Compute the amount of gross profit recognized during 2015 and 2016.

Accepted Answer

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

Question 19

Which of the following is not an indicator that revenue can be recognized over time?

Accepted Answer

A) The seller is enhancing an asset that the buyer controls as the service is performed. 
B) The customer consumes the benefit of the seller's work as the seller performs the service. 
C) The seller is creating an asset that has an alternative use to the seller,and the seller can receive payment for its progress even if the customer cancels the contract. 
D) None of the other answers is correct. 
A) The seller is enhancing an asset that the buyer controls as the service is performed. 
B) The customer consumes the benefit of the seller's work as the seller performs the service. 
C) The seller is creating an asset that has an alternative use to the seller,and the seller can receive payment for its progress even if the customer cancels the contract. 
D) None of the other answers is correct.

Question 20

What is the expected transaction price with variable consideration estimated as the most likely amount?

Accepted Answer

A) $4,750 
B) $5,000 
C) $5,500 
D) $5,750 
A) $4,750 
B) $5,000 
C) $5,500 
D) $5,750

Under which of the following circumstances is it most appropriate to use the residual method to estimate stand-alone selling prices?

A company is effectively leveraging when:

Mary signed up and paid $1200 for a 6 month ceramics course on June 1^st with Choplet Ceramics.As of August 1^st,Choplet's accounting records would indicate:

Assuming Brunetti uses the most likely value to estimate the variable consideration,calculate the transaction price.

Which of the following is not a performance obligation?

In franchise arrangements,the franchisor's performance obligations are not separately identifiable,so revenue must be recognized over time.

Are sellers ever constrained from including variable consideration in the transaction price used to estimate revenue? Explain,providing indicators of circumstances that could require that constraint.

A contract does not exist for purposes of applying the revenue recognition principle in all of the following cases except for when:

When accounting for revenue over time for a long-term contract,the percentage of completion used to recognize revenue in the first year usually is determined by measuring:

Stayman Associates has sold a good to a buyer and wants to recognize revenue.Which of the following is an indicator that control of a good has passed from Stayman to the buyer?

Which of the following is not an indicator that revenue can be recognized over time?

What is the expected transaction price with variable consideration estimated as the most likely amount?

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

Under which of the following circumstances is it most appropriate to use the residual method to estimate stand-alone selling prices?

A company is effectively leveraging when:

Mary signed up and paid $1200 for a 6 month ceramics course on June 1st with Choplet Ceramics.As of August 1st,Choplet's accounting records would indicate:

Assuming Brunetti uses the most likely value to estimate the variable consideration,calculate the transaction price.

Which of the following is not a performance obligation?

In franchise arrangements,the franchisor's performance obligations are not separately identifiable,so revenue must be recognized over time.

Are sellers ever constrained from including variable consideration in the transaction price used to estimate revenue? Explain,providing indicators of circumstances that could require that constraint.

A contract does not exist for purposes of applying the revenue recognition principle in all of the following cases except for when:

When accounting for revenue over time for a long-term contract,the percentage of completion used to recognize revenue in the first year usually is determined by measuring:

Stayman Associates has sold a good to a buyer and wants to recognize revenue.Which of the following is an indicator that control of a good has passed from Stayman to the buyer?

Which of the following is not an indicator that revenue can be recognized over time?

What is the expected transaction price with variable consideration estimated as the most likely amount?

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

Mary signed up and paid $1200 for a 6 month ceramics course on June 1^st with Choplet Ceramics.As of August 1^st,Choplet's accounting records would indicate: