1. Hickory Furniture Company paid for the following costs during the month of May:

Inventory purchases	$	40,000
Advertising costs		8,000
Delivery costs		2,000

Hickory sold $32,000 of the inventory and has agreed to pay warranty expenses for its customers. These are expected to be $1,600 and occur evenly over the next four months (i.e., starting in June).

What is the amount of Hickorys cash-basis expenses for the month of May?

Multiple Choice

• $33,600

• $50,000

• $42,400

• $51,600

2. The residual approach to allocate transaction prices to multiple performance obligations in a contract is appropriate when:

Multiple Choice

• None of the goods and services included in the contract are not sold on a stand-alone basis.

• None of the answer choices are correct.

• The stand-alone price of all of the goods or services is known.

• The stand-along price of one or more of the goods or services is highly variable or uncertain.

3. A patient of Dr. Jones presents his Medicare card after his appointment. The total charge for the services was $100; however, Medicare will pay only $60 for this service and the patient is to pay $20. Acceptance of the patients Medicare insurance creates a contract:

Multiple Choice

• for payment of $60 and a price concession of $40.

• for $20 and an $80 discount or price concession.

• for payment of $100, regardless of what Medicare will pay.

• for payment of $80 and a $20 discount or price concession.