1. Consider the following facts:

- On July 31, Company A contracted to have two products built by Company B for a total of $185,000.

- The contract specifies payment will only occur after both products have been shipped to Company A.

- Company A determines that the standalone prices are $100,000 for Product 1 and $85,000 for Product 2.

- On August 1, Product 1 is shipped by Company B to Company A. On August 1, Company B should prepare a journal entry to record this event. The journal entry should include a:

A. debit to Accounts Receivable for $85,000.

B. None of these answers are correct

C. debit to Contract Assets for $100,000.

D. debit to Contract Assets for $85,000.

E. debit to Accounts Receivable for $100,000.

2.

Which of the following statements is not true about a deferred tax liability?

a. None of these answers are correct

b. It causes taxable income in future periods to be less than financial income

c. It represents a future sacrifice

d. It is a present obligation

e. It results from a past transaction

3.

If a company has changes due to errors, it should use the current and prospective approach to account for the change.

True

False