1.) If in subsequent periods the franchisee's ability to pay significantly deteriorates and the collectability of the consideration in the franchise agreement becomes significantly uncertain,

a. the entity discontinues recognizing further revenues from the franchise contract.

b. the entity assesses any existing receivable or contract asset from the franchise contract for impairment

c. the entity shall discontinue its existing accounting policy on revenue recognition and shifts to either the installment sales method or the cost recovery method of revenue recognition

d. a and b

e. a and d

2.) Revenue from franchise contracts are accounted for in accordance with which of the following reporting standards?

a. PAS 18 Part B

b. PFRS 15

c. FAS No. 45 (US GAAP)

d. combination of a,b and c

3.) An entity is developing a multi-unit residential complex. A customer enters into a binding sales contract with the entity for a specified unit that is under construction. Each unit has a similar floor plan and is of a similar size, but other attributes of the units are different (for example, the location of the unit within the complex).

The customer pays a non-refundable deposit upon entering into the contract and will make progress payments during construction of the unit. The contract has substantive terms that preclude the entity from being able to direct the unit to another customer. In addition, the customer does not have the right to terminate the contract unless the entity fails to perform as promised. If the customer defaults on its obligations by failing to make the promised progress payments as and when they are due, the entity would have a right to all of the consideration promised in the contract if it completes the construction of the unit. The courts have previously upheld similar rights that entitle developers to require the customer to perform, subject to the entity meeting its obligations under the contract. Which of the following statements is correct?

a. the entity has a right to payment for performance completed to date.

b. The asset (unit) created by the entity's performance does not have an alternative use to the entity.

c. The entity's performance obligation is satisfied over time.

d. All of these

4.) Cloud Co. acquired an investment in Sky Co., a joint venture, for 100,000, incurring transaction costs of 1,000. Cloud Co. determined that it has joint control over Sky. Cloud Co. uses the PFRS for SMEs and elects the cost model for its investments in joint ventures. The investment's fair values were 102,000, 110,000 and 90,000 on December 31, 20x1, 20x2 and 20x3, respectively. Costs to sell were estimated at 4,000 throughout. Cloud Co. recognizes in its profit or loss which of the following amounts? gain (loss)

a. 20x1 - (3,000) 20x2 - 3,000 20x3 - (15,000)

b. 20x1 - (3,000) 20x2 - 8,000 20x3 - (20,000)

c. 20x1 - 0 20x2 - 0 20x3 - 0

d. 20x1 - (1,000) 20x2 - 8,000 20x3 - (20,000)

5.) According to PFRS 15, if the nature of the entity's promise to grant franchise rights in a franchise agreement is to provide the franchisee the right to use the entity's intellectual property as it exists at the point in time at which the license is granted, the initial franchise fee is recognized as revenue

a. at the point in time when the rights are transferred to the franchisee and the franchisee obtains the ability to use those rights.

b. over time, throughout the license period, starting from the time the rights are transferred to the franchisee and the franchisee obtains the ability to use those rights.

c. when there is substantial performance which is indicated by the commencement of the franchisee's business.

d. b or c depending on the substance of the agreement

6.) Which of the following statements is correct?

a. Long-term construction contracts are unique from other contracts with customers. Therefore, PFRS 15 requires an entity to recognize revenue from long-term construction contracts using either the percentage of completion method or the zero-profit method.

b. PFRS 15 does not exclude long-term construction contracts from its scope. However, because of the unique nature of long-term construction contracts, PFRS 15 requires an entity to recognize revenue from a long-term construction contract that is expected to be completed within 3 years or more using the percentage of completion method. For those that are expected to be completed within a shorter period, revenue shall be recognized when construction is complete.

c. Long-term construction contracts are unique from other contracts with customers. Therefore, PFRS 15 excludes from its scope the accounting for long-term construction contracts.

d. PFRS 15 does not provide a special distinction between long-term construction contracts from other types of contracts with customers. Therefore, an entity shall apply the same principles in accounting for long-term construction contracts as those applied to other types of contracts with customer

7.) Which of the following statements is incorrect if an entity's promise to grant a license is not distinct and that the performance obligation is satisfied at a point in time?

a. Recognize the sales-based (or usage-based) consideration in the contract as the subsequent sales or usages occur, notwithstanding the fact that the performance obligation is satisfied at a point in time.

b. Recognize the sales-based (or usage-based) consideration in the contract in full when the license is effectively transferred to the customer.

c. Recognize the fixed consideration as revenue in full when the license is effectively transferred to the customer.

d. Treat all promises in the contract, including the grant of license, as a single performance obligation

8.) If the promise to grant a license is distinct and that the license provides the customer the "right to use" the entity's intellectual property, how is revenue recognized from the initial fee in the contract?

a. in full when the customer obtains control of the license

b. in full upon the signing of the contract

c. deferred and amortized over the license period

d. deferred and recognized in full at the end of the license period

9.) On January 1, 20x1, Pongcuter Co. enters into a contract with a customer to grant a software license for 1,000,000. The fee is payable at contract inception. The license has a term of four years, to reckon from the date the customer can use the software. The customer can determine how and when to use the right without further performance by Pongcuter Co. and does not expect that Pongcuter Co. will undertake any activities that significantly affect the intellectual property to which the customer has rights. The software is transferred to the customer on February 1, 20x1. However, the code, which is necessary for the customer to use the software, is transferred only on April 1, 20x1. How should Pongcuter Co. recognize revenue from the fixed consideration in the contract?

a. in full on February 1,20x1

b. in full on April 1, 20x1

c. deferred and amortized over four years starting on April 1, 20x1

d. deferred and amortized over four years starting on February 1, 20x1

10.)Which of the following is excluded when computing for the total free assets?

a. realizable value of assets pledged to partially secured creditors

b. excess of realizable value of assets pledged to fully secured creditors over the expected net settlement amount of the fully secured liabilities.

c. total realizable value of assets not pledged as collateral security

d. all of the above items are included