Financial Reporting And Analysis 7Th Edition By Revsine – Test Bank
To Purchase
this Complete Test Bank with Answers Click the link Below
https://tbzuiqe.com/product/financial-reporting-and-analysis-7th-edition-by-revsine-test-bank/
If face any problem or
Further information contact us At tbzuiqe@gmail.com
Sample Test
Chapter 3 Revenue Recognition
True/False
[QUESTION]
1. The
underlying principal in ASC Topic 606 is that an entity recognizes revenue to
depict the transfer of promised goods or services to customers in an amount
that reflects the consideration expected to be exchanged for those goods or
services.
Answer:True
Learning Objective: 03-01
Difficulty: 1 Easy
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic:Revenue recognition―Five-Step model
[QUESTION]
2. Amounts
received from the sale of gift cards should be recognized by the seller at the
time of sale.
Answer: False
Learning Objective: 03-04
Difficulty: 1 Easy
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic:Recognize revenue―Point in time or over time
[QUESTION]
3. Under
a consignment arrangement, revenue is not recognized until the consigned goods
are sold to a third party.
Answer: True
Learning Objective: 03-04
Difficulty: 1 Easy
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Topic:Recognize revenue―Point in time or over time
[QUESTION]
4. ASC
Topic 606 provides a five-step model for evaluating how and when revenue should
be recognized rather than providing detailed industry-by-industry standards.
Answer: True
Learning Objective: 03-01
Difficulty: 1 Easy
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic:Revenue recognition―Five-Step model
[QUESTION]
5. Ann
Smith just saw her doctor. After the appointment, she was informed by the
receptionist that the fee for the visit is $75 and that her insurance company
will be billed for the visit. Ann was also notified that her insurance company
will pay all of the fee except for the $20 co-pay, which she pays with her
debit card right away. Because the doctor’s office has not entered into a
contract, it would not record revenue until it verifies that the insurance
company will pay.
Answer: False
Learning Objective: 03-02
Difficulty:2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Identify the contract
[QUESTION]
6.Gamebox sells video-gaming devices, games, and online game
subscriptions. The Gamebox system normally sells for $250 and comes prepackaged
with one game. The average price for games is $30. The company also sells its
online game subscription package, which allows members to download and play one
new game per month, for $240. During the holiday season, the company provides a
package deal which includes the gaming system with two games and a free
one-year game subscription for $400. The company should allocate$192.31of the
$400 package purchase price to the gaming system.
Answer: True
Learning Objective: 03-03
Difficulty: 3 Hard
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Transaction price—Customer option
Topic: Transaction price—Other items
[QUESTION]
7. Under
the percentage-of-completion method, the amount debited to “construction
expense” each period is the actual construction costs incurred in that period.
Answer: True
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic:Revenue recognition—Prior―Long-term contracts
[QUESTION]
8. Treating
the “billings on construction in progress” account as an off-set (contra) to
the construction inventory account avoids including certain costs and profits
twice on the balance sheet.
Answer: True
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic:Revenue recognition—Prior―Long-term contracts
[QUESTION]
9. Prior
to ASC Topic 606, the installment sales method of recognizing profit for
accounting purposes is acceptable GAAP if collection of the sales price
is not reasonably
assured.
Answer: True
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Topic:Revenue recognition―Prior―Installment sales
[QUESTION]
10. Initial
franchise fee revenue should be recognized when all material services or
conditions relating to the sale have been substantially performed by the
franchisor.
Answer: True
Learning Objective: 03-04
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Topic:Recognize revenue―Point in time or over time
Topic:Revenue recognition―Prior―Other topics
[QUESTION]
11. The
key accounting issue related to bundled (multiple-element) sales transactions
is the amount of revenue to be recognized over the contract period.
Answer: False
Learning Objective: 03-02
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic:Identify the performance obligation
Topic:Revenue recognition―Prior―Other topics
[QUESTION]
12.Both public U.S. companies and companies reporting under IFRS
must begin reporting revenue based on ASC Topic 606 in January 2018. Early
adoption is permitted under both U.S. GAAP and IFRS.
Answer: True
Learning Objective:03-08
Difficulty: 1 Easy
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Transition to new ASC standard
[QUESTION]
13. Sell4U
is an online site that allows its clients to post items for sale. Sell4U
charges a 5% brokerage fee for use of the site, payable within 10 days of the
sale. As an agent, Sell4U may recognize revenue for the brokerage fee as soon
as an item is sold.
Answer: True
Learning Objective: 03-05
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Principal or agent
[QUESTION]
14. Evans
Equipment sells, installs, and maintains manufacturing equipment. The typical
sales contract includes the purchase of the equipment, installation, and a
five-year maintenance contract. Most customers choose to trade in the equipment
for the new model at the end of the five-year contract. Evans Equipment should
amortize the cost of installation over five years.
Answer: True
Learning Objective:03-06
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Topic:Contract acquisition and fulfillment costs
[QUESTION]
15. Gamebox,
a seller of video-gaming systems, games and online gaming subscriptions,
recently made available a coupon that allows its gaming subscription members to
extend their subscriptions by three months at no charge. Subscribers need only
to login to the website using their user name and password and provide the
coupon code. Because this contract modification (from 12 months to 15 months)
does not add distinct goods or services from the original contract, Gamebox
need only make a cumulative catch-up adjustment.
Answer: True
Learning Objective: 03-07
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Multiple Choice
[QUESTION]
16.The time that the performance obligation is satisfied for
revenue recognition is usually
1. before
the sale.
2. after
the sale.
3. at
the time of sale.
4. when
payment is received.
Answer: c
Learning Objective: 03-04
Difficulty: 1 Easy
AACSB: Reflective Thinking
AICPA FN: Measurement
Blooms: Understand
Topic:Recognize revenue―Point in time or over time
[QUESTION]
17. If
consideration is received before a contract is identified and the consideration
is nonrefundable, revenue may be recognized if
18. the
contract has been terminated.
19. goods
have been delivered.
20. there
is no remaining obligation to transfer goods.
21. any
of these answer choices is correct.
Answer: a
Learning Objective: 03-02
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Topic:Identify the contract
[QUESTION]
18. Under
ASC Topic 606 guidance for revenue recognition, all of the following conditions
must be met to account for a contract with a customer, except
19. the
contract has commercial substance.
20. collection
is likely.
21. each
party’s rights are identified regarding goods or services to be exchanged.
22. all
parties to the contract have approved the contract.
Answer: b
Learning Objective: 03-02
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Topic:Identify the contract
[QUESTION]
19. Assuming
the requirements for recognizing revenue over time are met, and using the
percentage-of-completion method to recognize revenue, the measure of completion
is computed by dividing
20. profits
earned to date by estimated total profits.
21. costs
incurred to date by estimated total costs.
22. costs
incurred to date by the contract price.
23. profits
earned to date by the contract price.
Answer: b
Learning Objective: 03-04
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Topic:Recognize revenue―Point in time or over time
Topic:Revenue recognition—Prior―Long-term contracts
[QUESTION]
20. Assuming
the requirements for recognizing revenue over time are met, and using the
percentage-of-completion method, the profit to be recognized in any year is
based on the completion ratio of
21. incurred
contract costs divided by estimated total contract costs.
22. incurred
contract costs multiplied by estimated total contract costs.
23. estimated
total contract costs divided by incurred contract costs.
24. estimated
total contract costs multiplied by incurred contract costs.
Answer: a
Learning Objective: 03-04
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Topic:Recognize revenue―Point in time or over time
Topic:Revenue recognition—Prior―Long-term contracts
REFERENCE: Ref. 03_01
Noah Construction Company is building a large complex for a
contract price of $5,000,000.This is a three-year project and the requirements
for recognizing revenue over time are met. The total estimated cost of the
project is $4,000,000 and the following information is available:
|
($ in thousands) |
Year 1 |
Year 2 |
Year 3 |
|
Costs incurred |
$ 1,000 |
$ 1,500 |
$ 1,250 |
|
Estimated completion costs |
$ 3,000 |
$ 1,500 |
$
0 |
|
Billings |
$ 750 |
$ 1,750 |
$ 2,500 |
|
Cash collected |
$ 500 |
$ 1,500 |
$ 3,000 |
[QUESTION]
REFER TO: Ref. 03_01
21. Using
the percentage-of-completion method of revenue recognition, how much income is
recognized in Year 2?
22. $250,000
23. $375,000
24. $625,000
25. $3,125,000
Answer: b
Feedback: Year 1 = ($1,000,000 ÷ $4,000,000) × $1,000,000 estimated
profit = $250,000
Year 2 = ($2,500,000 ÷ $4,000,000) × $1,000,000 estimated profit
= $625,000 − $250,000 recognized in Year 1 = $375,000 recognized in Year 2.
Learning Objective: 03-04
Learning Objective: 03-09
Difficulty: 3 Hard
AACSB: Knowledge Application
AICPA: FN Measurement
Blooms: Apply
Topic:Recognize revenue―Point in time or over time
Topic:Revenue recognition—Prior―Long-term contracts
[QUESTION]
REFER TO: Ref. 03_01
22. Using
the percentage-of-completion method of revenue recognition, how much income is
recognized in Year 3?
23. $375,000
24. $625,000
25. $1,000,000
26. $1,250,000
Answer: b
Feedback: Year 3 = ($3,750,000 ÷ $3,750,000) × $1,250,000 actual
profit = $1,250,000 − $625,000 recognized in prior years = $625,000
Learning Objective: 03-04
Learning Objective: 03-09
Difficulty: 3 Hard
AACSB: Knowledge Application
AICPA: FN Measurement
Blooms: Apply
Topic:Recognize revenue―Point in time or over time
Topic:Revenue recognition—Prior―Long-term contracts
[QUESTION]
REFER TO: Ref. 03_01
23. Which
one of the following entries would be made in Year 1 to record the costs
incurred using the percentage-of-completion method of revenue recognition?
|
a. |
DR Inventory: Construction in progress |
$1,000,000 |
|
|
|
CR Accounts payable, cash, etc. |
|
$1,000,000 |
|
b. |
DR Inventory: Construction in progress |
$1,000,000 |
|
|
|
CR Income on long-term
construction contract |
|
$1,000,000 |
|
c. |
DR Inventory: Construction in progress |
$1,000,000 |
|
|
|
CR Billings on construction in
progress |
|
$1,000,000 |
|
d. |
DR Income on long-term construction contract |
$1,000,000 |
|
|
|
CR Accounts payable, cash, etc. |
|
$1,000,000 |
Answer: a
Learning Objective: 03-04
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Knowledge Application
AICPA: FN Measurement
Blooms: Apply
Topic:Recognize revenue―Point in time or over time
Topic:Revenue recognition—Prior―Long-term contracts
[QUESTION]
REFER TO: Ref. 03_01
24. Which
one of the following entries would be made in Year 1 to record the income recognized
using the percentage-of-completion method of revenue recognition?
|
a. |
DR Inventory: Construction in progress |
$250,000 |
|
|
|
DR Construction expense |
$1,000,000 |
|
|
|
CR Construction revenue |
|
$1,250,000 |
|
b. |
DR Inventory: Construction in progress |
$375,000 |
|
|
|
CR Billings on construction in
progress |
|
$375,000 |
|
c. |
DR Inventory: Construction in progress |
$675,000 |
|
|
|
CR Billings on construction in
progress |
|
$675,000 |
|
d. |
DR Income on long-term construction contract |
$3,125,000 |
|
|
|
CR Accounts payable, cash, etc. |
|
$3,125,000 |
Answer: a
Learning Objective: 03-04
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Knowledge Application
AICPA: FN Measurement
Blooms: Apply
Topic:Recognize revenue―Point in time or over time
Topic:Revenue recognition—Prior―Long-term contracts
[QUESTION]
REFER TO: Ref. 03_01
25. Which
one of the following entries would be made in Year 2 to record the
customer billing using the percentage-of-completion method of revenue
recognition?
|
a. |
DR Accounts receivable |
$1,500,000 |
|
|
|
CR Cash |
|
$1,500,000 |
|
b. |
DR Accounts receivable |
$1,500,000 |
|
|
|
CR Billings on construction in
progress |
|
$1,500,000 |
|
c. |
DR Accounts receivable |
$1,750,000 |
|
|
|
CR Income on long-term construction
contract |
|
$1,750,000 |
|
d. |
DR Accounts receivable |
$1,750,000 |
|
|
|
CR Billings on construction in
progress |
|
$1,750,000 |
Answer: d
Learning Objective: 03-04
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Knowledge Application
AICPA: FN Measurement
Blooms: Apply
Topic:Recognize revenue―Point in time or over time
Topic:Revenue recognition—Prior―Long-term contracts
[QUESTION]
REFER TO: Ref. 03_01
26. Using
revenue recognition standards prior to ASC Topic 606, which one of the
following entries would be made in Year 3 to record the completion and
acceptance of the project using the completed-contract
method of revenue recognition?
|
a. |
DR Inventory: Construction in progress |
$5,000,000 |
|
|
|
CR Billings on construction in
progress |
|
$5,000,000 |
|
b. |
DR Billings on construction in progress |
$5,000,000 |
|
|
|
CR Inventory: Construction in
progress |
|
$3,750,000 |
|
|
CR Income on long-term construction
contract |
|
$1,250,000 |
|
c. |
DR Inventory: Construction in progress |
$3,750,000 |
|
|
|
DR Income on long-term construction contract |
$1,250,000 |
|
|
|
CR Billings on construction in
progress |
|
$5,000,000 |
|
d. |
DR Billings on construction in progress |
$1,250,000 |
|
|
|
CR Inventory: Construction in
progress |
|
$1,250,000 |
Answer: b
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Knowledge Application
AICPA: FN Measurement
Blooms: Apply
Topic: Revenue recognition—Prior―Long-term contracts
[QUESTION]
27.Borden Construction entered into the following contracts with
Lovely Landscaping, LLP: (1) construct a paver patio, (2) plant trees, and (3)
landscape planting beds for a new home construction project. Lovely Landscaping
should treat the contracts
1. as a
single contract.
2. as
three separate contracts.
3. as
two contracts—one for hardscaping and one for landscaping.
4. None
of these.
Answer: a
Learning Objective: 03-02
Difficulty:2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Identify the contract
[QUESTION]
28. Prior
to ASC Topic 606 for revenue recognition, when losses occur on long-term
contracts using the completed-contract method, they are recognized
29. proportionately
over the contract period using costs incurred as a base.
30. evenly
over the contract period.
31. intheirentiretyassoonasitbecomesknownthatalosswillbesuffered.
32. at
the completion of the project.
Answer: c
Learning Objective: 03-09
Difficulty: 1 Easy
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Remember
Topic:Revenue recognition—Prior―Long-term contracts
REFERENCE: Ref. 03_02
|
On January 1, 2018, Monroe
Contractors signed a contract to inspect and complete needed repairs to the
water lines for the town of Pleasantville. Because Monroe will not know which
water lines will need repairs until after it completes the inspections, it is
difficult to accurately estimate the amount it will charge the town.
Therefore, Monroe will recognize revenue for the contract using the
completed-contract method. The work is expected to be completed in 2020. |
[QUESTION]
REFER TO: Ref. 03_02
29. Using
a completed-contractmethod prior to ASC Topic 606 for revenue recognition, if
Monroe had $1.5 million in its Construction In Progress Inventory account and
billings to Pleasantville of $2 million as of December 31, 2018, how much net
income should Monroe Construction recognize for 2018?
30. $0
31. $500,000
32. $2
million
33. $1.5
million
Answer: a
Feedback: Under the completed-contract method, revenue is
recognized when the project is completed; therefore, Monroe would not recognize
revenue until 2020.
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Knowledge Application
AICPA: FN Measurement
Blooms: Apply
Topic: Revenue recognition—Prior―Long-term contracts
[QUESTION]
REFER TO: Ref. 03_02
30. Which
of the following is not a
permitted simpler approach to revenue recognition under ASC Topic 606 for
revenue recognition?
31. Applying
the 5-step model to a portfolio of similar contracts
32. Using
the previous revenue recognition rules instead of the 5-step model.
33. Not
adjusting for significant financial components if the contract period is one
year or less.
34. Recognizing
revenue for the amount invoiced to the customer.
Answer: b
Learning Objective: 03-04
Difficulty: 1 Easy
AACSB: Knowledge Application
AICPA: FN Measurement
Blooms: Understand
Topic: Recognize revenue―Point in time or over time
[QUESTION]
REFER TO: Ref. 03_02
31.Burgers and More operates a chain of fast-food restaurants
across the United States. The restaurants are franchised operations. Under the
franchise agreement, restaurant owners have the right to use the Burgers and
More trade name, financing arrangements for franchisees, and management
training at the corporate headquarters as well as the right to use training
videos for their employees. The Burgers and More franchise contracts contain
the following separate performance obligations:
1. intellectual
property, training
2. intellectual
property, financing, and training
3. intellectual
property
4. financing
and training
Answer: b
Learning Objective: 03-02
Difficulty: 2 Medium
AACSB: KnowledgeApplication
AICPA: FN Measurement
Blooms: Apply
Topic: Identify the performance obligation
[QUESTION]
REFER TO: Ref. 03_02
32. Which
of the following criteria must be met to recognize revenue under a
bill-and-hold arrangement?
33. The
reason for the bill-and-hold arrangement is substantive.
34. The
product is identified separately as belonging to the customer.
35. The
product is ready for physical transfer to the customer
36. All
of these criteria must be met to recognize revenue under a
bill-and-holdarrangement.
Answer: d
Learning Objective: 03-04
Difficulty:1 Easy
AACSB: Knowledge Application
AICPA: FN Measurement
Blooms: Understand
Topic: Recognize revenue—Point in time or over time
REFERENCE: Ref. 03_03
Ford Appliance Center records revenue on the installment sales
method, prior to ASC Topic 606 for revenue recognition. The following
information is available for the first two years of business.
|
|
Year 1 |
Year 2 |
|
Sales |
$200,000 |
$250,000 |
|
Cost of goods sold |
140,000 |
162,500 |
|
Cash collections: |
|
|
|
Year 1 sales |
100,000 |
80,000 |
|
Year 2 sales |
|
130,000 |
[QUESTION]
REFER TO: Ref. 03_03
33. How
much realized gross profit on installment sales will Ford recognize in Year 1?
34. $20,000
35. $30,000
36. $60,000
37. $100,000
Answer: b
Feedback: Sales $200,000 − COGS $140,000 = Gross profit $60,000
$60,000 ÷ $200,000 = 30% × Cash collections $100,000 = $30,000
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Knowledge Application
AICPA: FN Measurement
Blooms: Apply
Topic:Revenue recognition―Prior―Installment sales
[QUESTION]
REFER TO: Ref. 03_03
34. Assume
that Ford Appliance Center has consistently recognized revenue on installment
sales using the cost recovery method.How much realized gross profit on
installment sales will Ford recognize in Year 1?
35. $0
36. $30,000
37. $60,000
38. $100,000
Answer: a
Feedback: Ford is using the cost recovery method.Since cash
collections were less than cost of goods sold, no gross profit is recognized in
Year 1.
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Knowledge Application
AICPA: FN Measurement
Blooms: Apply
Topic: Revenue recognition―Prior―Installment sales
[QUESTION]
REFER TO: Ref. 03_03
35. How
much realized gross profit on installment sales will Ford recognize in Year 2?
36. $24,000
37. $45,500
38. $69,500
39. $130,000
Answer: c
Feedback:
|
Year 1: Collections $80,000
× 30% = |
|
$24,000 |
|
Year 2: Sales $250,000 −
COGS $162,500 = Gross profit $87,500 |
|
|
|
$87,500 ÷ $250,000 = 35% ×
Cash collections $130,000 = |
|
45,500 |
|
Total gross profit year 2 |
|
$69,500 |
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Knowledge Application
AICPA: FN Measurement
Blooms: Apply
Topic: Revenue recognition―Prior―Installment sales
[QUESTION]
REFER TO: Ref. 03_03
36. Which
one of the following entries properly records the installment sales for Year 2?
|
a. |
DR Accounts receivable—Year 1 |
$200,000 |
|
|
|
DR Accounts receivable—Year 2 |
$250,000 |
|
|
|
CR Realized gross profit on
installment sales |
|
$450,000 |
|
b. |
DR Realized gross profit on installment sales |
$250,000 |
|
|
|
CR Installment sales revenue |
|
$250,000 |
|
c. |
DR Installment sales revenue |
$250,000 |
|
|
|
CR Realized gross profit on
installment sales |
|
$250,000 |
|
d. |
DR Accounts receivable—Year 2 |
$250,000 |
|
|
|
CR Installment sales revenue |
|
$250,000 |
Answer: d
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Knowledge Application
AICPA: FN Measurement
Blooms: Apply
Topic:Revenue recognition―Prior―Installment sales
[QUESTION]
REFER TO: Ref. 03_03
37. Which
one of the following entries properly records the cost of installment goods
sold for Year 2?
|
a. |
DR Cost of installment goods sold |
$162,500 |
|
|
|
CR Inventory |
|
$162,500 |
|
b. |
DR Cost of installment goods sold |
$302,500 |
|
|
|
CR Inventory |
|
$302,500 |
|
c. |
DR Cost of installment goods sold |
$162,500 |
|
|
|
CR Installment sales revenue |
|
$162,500 |
|
d. |
DR Cost of installment goods sold |
$302,500 |
|
|
|
CR Installment sales revenue |
|
$302,500 |
Answer: a
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Knowledge Application
AICPA: FN Measurement
Blooms: Apply
Topic: Revenue recognition―Prior―Installment sales
[QUESTION]
38.Which of the following is not a factor that indicates
multiple performance obligations in a contract?
1. The
integration of multiple goods and services provides a significant service to
the customer.
2. One
or more of the goods or services significantly modifies other goods or services
promised in the contract.
3. The
goods or services in the contract are highly interdependent or interrelated.
4. All
of these are factors.
Answer: d
Learning Objective: 03-02
Difficulty: 1 Easy
AACSB: Knowledge Application
AICPA: FN Measurement
Blooms: understand
Topic:Identify the performance obligation
[QUESTION]
39. CPA
Now developed an app to help prepare for the CPA exam. Customers may separately
purchase (a) the app, (b) updates to the app, and (c) coaching support for the
exam, or a package that includes the app and free updates coaching support
until they pass the exam. The package deal includes performance obligation(s).
40. one
41. two
42. three
43. zero
Answer: c
Learning Objective: 03-02
Difficulty: 2 Medium
AACSB: Knowledge Application
AICPA: FN Measurement
Blooms: Apply
Topic: Identify the performance obligation
[QUESTION]
40.Yashito Corporation sells cameras and accessories. The
company’s newest model, popular with preteens, takes wallet-sized instant
photos. The wholesale price for this camera is $50. In addition, the company
sells carrying cases ($25), film cartridges ($15), and selfie lenses ($10) made
especially for this camera. During the holiday season, Yashito offers the
camera, film, carrying case, and selfie lens as a package for $75. For each
package sold, the transaction price allocated to the camera is
100.
$100.
101.
$75.
102.
$50.
103.
$37.50.
Answer: d
Learning Objective: 03-03
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Transaction price―Variable consideration
[QUESTION]
41. Under
ASC Topic 606 for revenue recognition, a performance obligation is considered
satisfied when control over the goods and services is transferred to the
customer. Which of the following is not an
indicator that control has transferred?
a.The customer is legally obligated to pay for the goods or
services.
1. The
customer has legal title of the goods.
2. The
customer has accepted the goods and has physical possession of the goods.
3. All
of these are indicators that control has transferred.
Answer: d
Learning Objective: 03-04
Difficulty: 1 Easy
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic:Recognize revenue—Point in time or over time
[QUESTION]
42.Hargren Publishing offers its Accounting textbooks as e-texts
through its online homework management system. Purchase of an access code
provides the student with access to the e-text and online learning materials
for six months. During that time, students have access to updates to the text
and learning materials. Hargren should recognize revenue for purchases of
access codes
1. at
the end of the six-month access period.
2. when
they occur.
3. over
the six-month period during which the customer has access.
4. at
the beginning of the semester in which the student will use the access code.
Answer: c
Learning Objective: 03-04
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic:Recognize revenue—Point in time or over time
[QUESTION]
43.In 2017, Borden Construction was contracted to build an
apartment complex for its client, Deer Park Realty Management. The project was
estimated to cost $15 million; however, on December 31, 2017, when the project
was 75% complete, Borden estimated that the project costs would be much less,
and agreed to adjust the contract price to $10 million. Prior to December 31,
2017, Borden Construction had recognized revenue of $10 million. At year end,
Borden should
2. make
a correction for $2.5 million in over-recognized revenue.
3. record
nothing.
4. record
additional $5 million in revenue.
5. make
a correction for $5 million in over-recognized revenue.
Answer: a
Learning Objective: 03-07
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic:Contract modifications
[QUESTION]
44. Continuing
franchise fees that are based on the franchisee’s percentage of sales should be
recognized by the franchisor as revenue
45. when
the fee is received.
46. over
time when the sales are reported to the franchisor.
47. in
accordance with the franchise agreement.
48. only
after the balance of the initial franchise fee has been received.
Answer: b
Learning Objective: 03-04
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic:Recognize revenue―Point in time or over time
[QUESTION]
45. Initial
franchise fees should be recorded as revenue by the franchisor
46. in
accordance with the franchise agreement.
47. when
cash is received from the franchisee.
48. when
all material services relating to the sale have been performed.
49. during
the year the franchise agreement is signed.
Answer: c
Learning Objective: 03-04
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic:Recognize revenue―Point in time or over time
Topic:Revenue recognition―Prior―Other topics
[QUESTION]
46. Under
GAAP prior to ASC Topic 606 for revenue recognition, which of the following
conditions is not necessary
for a seller to recognize revenue at time of sale when a right of return exists?
47. The
seller’s price to the buyer is fixed.
48. The
buyer has paid the seller.
49. The
goods must have been delivered under a formal consignment arrangement.
50. The
amount of future returns can be reasonably estimated.
Answer: c
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic:Revenue recognition―Prior―Other topics
[QUESTION]
47. GAAP
prior to ASC Topic 606 for revenue recognition specifies that for a seller to
record revenue at time of sale when right
of return exists the following conditions must be
met except:
48. The
seller’s price to the buyer is substantially fixed or determinable at the date
of sale.
49. The buyer
has paid the seller, or the buyer is obligated to pay the seller and the
obligation is not contingent on resale of the product.
50. The
buyer’s obligation to the seller does not change in the event of theft or
physical destruction or damage of the product.
51. The
buyer is a special purpose entity established by the seller for the sole
purpose of buying and reselling the seller’s product.
Answer: d
Learning Objective: 03-09
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic:Revenue recognition―Prior―Other topics
[QUESTION]
48. The
key accounting issue related to bundled products such as software licenses and
technical support
49. is
the method of revenue recognition.
50. is
the amount of revenue to recognize over the life of the contract.
51. depends
on whether the customer is able to pay for the contracted services.
52. concerns
the amount of transaction price to allocate to each contract element.
Answer: d
Learning Objective: 03-03
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic:Transaction price―Other items
[QUESTION]
49. Under
ASC Topic 606 for revenue recognition, which of the following statements
is not accurate
regarding performance obligations?
50. Firms
must disclose qualitative information about their performance obligations.
51. Firms
must disclose warranties provided.
52. Firms
are not required to disclose any judgments used to apply the standard.
53. Firms
must disclose the aggregate amount of the transaction price allocated to
unsatisfied performance obligations.
Answer:c
Learning Objective: 03-02
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic:Identify the performance obligation
[QUESTION]
50. Examples
of variable consideration include all of the following except
51. penalties
for not completing performing on a contract on time.
52. bonuses
for completing performance on a contract early.
53. discounts
on transaction prices.
54. all
of the answer choices are correct.
Answer: d
Learning Objective: 03-03
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic:Transaction price―Variable consideration
[QUESTION]
51. A
right of return exists when
52. the
customer is entitled to a full or partial refund.
53. the
customer is entitled to a credit against amounts owed.
54. the
customer is entitled to another product in exchange.
55. any
one of these conditions is met.
Answer: d
Learning Objective: 03-03
Difficulty: 2 Medium
AACSB: Reflective Thinking
AICPA: FN Measurement
Blooms: Understand
Topic: Transaction price―Right of return
Comments
Post a Comment