Question 1

The most popular input measure used to determine the progress toward completion is

Accepted Answer

A)  units-of-delivery method.
B)  cost-to-cost basis.
C)  labor hours worked.
D)  tons produced.

Question 2

If the performance obligation is not highly dependent on, or interrelated with, other promises in the contract, then each performance obligation should be accounted for separately.

Accepted Answer

A) True 
 B)False

Question 3

Partial satisfaction of a multiple performance obligation is reported on the statement of financial position as

Accepted Answer

A)  contract liability.
B)  receivable.
C)  contract asset.
D)  unearned service revenue.

Question 4

A warranty provided when a customer exercises an option to purchase a warranty is recorded as

Accepted Answer

A)  an expense in the period the goods or services are sold.
B)  a warranty liability for all costs incurred after sale due to correction of defects.
C)  revenue in the period that the service-type warranty is in effect.
D)  an assurance type warranty which is included in the sales price of the product.

Question 5

A performance obligation is a written guarantee in a contract to provide a product or service to a customer.

Accepted Answer

A) True 
 B)False

Question 6

When multiple performance obligations exists in a contract, they should be accounted for as a single performance obligation when

Accepted Answer

A)  each service is interdependent and interrelated.
B)  the performance obligations are distinct but interdependent.
C)  the product is distinct within the contract.
D)  determination cannot be made.

Question 7

Revenue is recognized in the accounting period when the performance obligation is satisfied.

Accepted Answer

A) True 
 B)False

Question 8

When sales are made with a right of return, the company

Accepted Answer

A)  should not recognize any revenue.
B)  should recognize revenue for the full sales price.
C)  records the returned asset in a separate inventory account.
D)  record the estimated returns in the Sales Returns account.

Question 9

Franchise revenue are recognized over time if

Accepted Answer

A)  franchise rights are transferred at a point in time.
B)  the franchisor is providing access to the right rather than transferring control.
C)  performance obligations regarding franchise rights are completed when the franchise opens.
D)  the franchisee fee is payable upon signing of contract.

Question 10

Cost estimates on a long-term contract may indicate that a loss will result on completion of the entire contract.In this case, the entire expected loss should be

Accepted Answer

A)  recognized in the current period, regardless of whether the percentage-of-completion or cost-recovery method is employed.
B)  recognized in the current period under the percentage-of-completion method, but the cost-recovery method defers recognition of the loss to the time when the contract is completed.
C)  recognized in the current period under the cost-recovery method, but the percentage-of-completion method defers the loss until the contract is completed.
D)  deferred and recognized when the contract is completed, regardless of whether the percentage-of-completion or cost-recovery method is employed.

Question 11

The use of the net method of recognizing revenue by an agent

Accepted Answer

A)  is appropriate as long as both revenue and costs are included.
B)  is the correct method in a principal-agent relationship.
C)  could result in an overstatement of the agent's revenue.
D)  could result in an understatement of the agent's revenue.

Question 12

Continuing franchise fees should be recorded by the franchisor

Accepted Answer

A)  as revenue when uncertainty related to the variable consideration is resolved.
B)  as revenue when received.
C)  in accordance with the accounting procedures specified in the franchise agreement.
D)  as revenue only after the balance of the initial franchise fee has been collected.

Question 13

The Construction in Process account includes only construction costs under the percentage-of-completion method.

Accepted Answer

A) True 
 B)False

Question 14

When a contract modification does not result in a separate performance obligation, the additional products are priced at the

Accepted Answer

A)  standalone price of the product.
B)  blended price of original contract and contract modification.
C)  average selling price of original selling price and standalone price.
D)  selling price specified in contract modification

Question 15

When the bundle price is less than the sum of the standalone prices, the discount should be allocated to

Accepted Answer

A)  the product (or products)  associated with the discount.
B)  the entire bundle of products or services.
C)  the product cost, thereby increasing product margin.
D)  the selling price of product or services provided.

Question 16

The first step in the process for revenue recognition is to

Accepted Answer

A)  determine the transaction price.
B)  identify the contract with the customer.
C)  allocate the transaction price to the separate performance obligations.
D)  identify the separate performance obligations in the contract.

Question 17

On January 15, 2015, Bella Vista Company enters into a contract to build custom equipment for ABC Carpet Company.The contract specified a delivery date of March 1.The equipment was not delivered until March 31.The contract required full payment of $75,000 30 days after delivery.This contract should be

Accepted Answer

A)  recorded on January 15, 2015.
B)  recorded on March 1, 2015.
C)  recorded on March 31, 2015.
D)  recorded on April 30, 2015.

Question 18

A contract

Accepted Answer

A)  must be in writing to be an enforceable contract.
B)  is an agreement that creates enforceable rights and obligations.
C)  is enforceable if each party can unilaterally terminate the contract.
D)  does not need to have commercial substance.

Question 19

When a company has an obligation or right to repurchase an asset for an amount greater than or equal to its selling price, the transaction should be treated as a

Accepted Answer

A)  outright sale.
B)  financing transaction.
C)  repurchase transaction.
D)  put option.

Question 20

Warranties that the product meets agreed-upon specifications in the contract at the time the product is sold are referred to as assurance-type warranties.

Accepted Answer

A) True 
 B)False

Exam 18: Revenue Recognition

A contract

Correct Answer
verified

Warranties that the product meets agreed-upon specifications in the contract at the time the product is sold are referred to as assurance-type warranties.

Correct Answer
verified

When multiple performance obligations exists in a contract, they should be accounted for as a single performance obligation when

Correct Answer
verified

Correct Answer
verified

The first step in the process for revenue recognition is to

Correct Answer
verified

The Construction in Process account includes only construction costs under the percentage-of-completion method.

Correct Answer
verified

When a company has an obligation or right to repurchase an asset for an amount greater than or equal to its selling price, the transaction should be treated as a

Correct Answer
verified

Partial satisfaction of a multiple performance obligation is reported on the statement of financial position as

Correct Answer
verified

Continuing franchise fees should be recorded by the franchisor

Correct Answer
verified

When a contract modification does not result in a separate performance obligation, the additional products are priced at the

Correct Answer
verified

A performance obligation is a written guarantee in a contract to provide a product or service to a customer.

Correct Answer
verified

Cost estimates on a long-term contract may indicate that a loss will result on completion of the entire contract.In this case, the entire expected loss should be

Correct Answer
verified

The most popular input measure used to determine the progress toward completion is

Correct Answer
verified

When the bundle price is less than the sum of the standalone prices, the discount should be allocated to

Correct Answer
verified

If the performance obligation is not highly dependent on, or interrelated with, other promises in the contract, then each performance obligation should be accounted for separately.

Correct Answer
verified

A warranty provided when a customer exercises an option to purchase a warranty is recorded as

Correct Answer
verified

Franchise revenue are recognized over time if

Correct Answer
verified

Revenue is recognized in the accounting period when the performance obligation is satisfied.

Correct Answer
verified

The use of the net method of recognizing revenue by an agent

Correct Answer
verified

When sales are made with a right of return, the company

Correct Answer
verified

Exam 18: Revenue Recognition

A contract

Correct AnswerverifiedShow Answer

Warranties that the product meets agreed-upon specifications in the contract at the time the product is sold are referred to as assurance-type warranties.

Correct AnswerverifiedShow Answer

When multiple performance obligations exists in a contract, they should be accounted for as a single performance obligation when

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The first step in the process for revenue recognition is to

Correct AnswerverifiedShow Answer

The Construction in Process account includes only construction costs under the percentage-of-completion method.

Correct AnswerverifiedShow Answer

When a company has an obligation or right to repurchase an asset for an amount greater than or equal to its selling price, the transaction should be treated as a

Correct AnswerverifiedShow Answer

Partial satisfaction of a multiple performance obligation is reported on the statement of financial position as

Correct AnswerverifiedShow Answer

Continuing franchise fees should be recorded by the franchisor

Correct AnswerverifiedShow Answer

When a contract modification does not result in a separate performance obligation, the additional products are priced at the

Correct AnswerverifiedShow Answer

A performance obligation is a written guarantee in a contract to provide a product or service to a customer.

Correct AnswerverifiedShow Answer

Cost estimates on a long-term contract may indicate that a loss will result on completion of the entire contract.In this case, the entire expected loss should be

Correct AnswerverifiedShow Answer

The most popular input measure used to determine the progress toward completion is

Correct AnswerverifiedShow Answer

When the bundle price is less than the sum of the standalone prices, the discount should be allocated to

Correct AnswerverifiedShow Answer

If the performance obligation is not highly dependent on, or interrelated with, other promises in the contract, then each performance obligation should be accounted for separately.

Correct AnswerverifiedShow Answer

A warranty provided when a customer exercises an option to purchase a warranty is recorded as

Correct AnswerverifiedShow Answer

Franchise revenue are recognized over time if

Correct AnswerverifiedShow Answer

Revenue is recognized in the accounting period when the performance obligation is satisfied.

Correct AnswerverifiedShow Answer

The use of the net method of recognizing revenue by an agent

Correct AnswerverifiedShow Answer

When sales are made with a right of return, the company

Correct AnswerverifiedShow Answer

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