1. Rhonda Company enters into a contract with Petersburg, Inc. on March 5. According to the contract, Rhonda is scheduled to deliver 100 units of Product 1 at a sales price of $60 per unit and 150 units of Product 2 to Petersburg, Inc. by June 30 at a sales price of $75 per unit. Rhonda agrees to deliver both Products 1 and 2 before being entitled to any payments. The following deliveries are made by Rhonda to Petersburg: On March 25, Rhonda delivers 100 units of Product 1.On June 20, Rhonda delivers 150 units of Product 2.

What amount(s) relating to this contract should Rhonda report on its June 30 balance sheet?

a$6,000 Contract Asset and $11,250 Accounts Receivable

b$17,250 Accounts Receivable

c$17,250 Contract Asset

d$6,000 Accounts Receivable and $11,250 Contract Asset

2. Quarry Company enters into a contract with Eclipse Manufacturing to purchase a large piece of machinery. The contract includes both the machine and installation for a single total contract sales price. Quarry does not have the specialized expertise to install the machine, and Eclipse commonly includes installation as part of the single contract price it quotes its customers. How should Eclipse allocate the contract price to the performance obligation(s)?

A.The contract price should be allocated to the installation and the machine should be capitalized.

B.The entire sales price for the contract should be allocated to a single performance obligation.

C.The contract price should be allocated based on the proportion of the total standalone prices represented by the machine and installation as two separate performance obligations.

D.The sales price for the contract should be split between the machine and the installation based on the proportion of service hours represented by each.

3. Rhonda Company enters into a contract with Petersburg, Inc. on March 5. According to the contract, Rhonda is scheduled to deliver 100 units of Product 1 at a sales price of $60 per unit and 150 units of Product 2 to Petersburg, Inc. by June 30 at a sales price of $75 per unit. Rhonda agrees to deliver both Products 1 and 2 before being entitled to any payments. The following deliveries are made by Rhonda to Petersburg: On March 25, Rhonda delivers 100 units of Product 1.On June 20, Rhonda delivers 150 units of Product 2.

What amount(s) relating to this contract should Rhonda report on its March 31 balance sheet?

A.$6,000 Contract Asset and $11,250 Unearned Revenue

B.$6,000 Accounts Receivable

C.$6,000 Contract Asset

D.$6,000 Contract Asset and $6,000 Accounts Receivable

4. Claytor Company offers buyers a right of return on all sales of its devices. Claytor sells 200 devices to a buyer and expects that 15 of the devices will be returned. Each device is sold to the buyer for $40. If the buyer returns 8 devices before the end of the year, what amount should Claytor reflect in its Allowance for Sales Returns and Allowances account?

A.$280 credit

B.$320 debit

C.$320 credit

D.$280 debit

5. Fowler Inc. purchases new appliances for several new restaurants that are under construction. Godwin sells the appliances to Fowler and agrees to retain physical possession of the appliances until Fowler's restaurants are ready to take delivery. The total contract price is $45,000. Godwin has separated the appliances from its other appliance inventory and clearly marked them as belonging to Fowler. Godwin has already prepped the appliances for immediate delivery, and the product will not be directed to another customer. How much revenue should Godwin recognize in the current period from this contract?

A. $22,500

B.$45,000

C.$15,000

D.$0

6. Draper Company sold $200,000 of extended warranties in 20X8. The warranty represents a separate performance obligation and covers any repairs needed over the next four years. The warranty takes effect on January 1, 20X9. Draper uses a straightline approach to recognize warranty revenue. What amounts of Warranty Revenue and Unearned Warranty Revenue, respectively, should Draper report in its December 31, 20X9, Income Statement and Balance Sheet?

A.$200,000 Warranty Revenue on its Income Statement and $0 Unearned Warranty Revenue on its Balance Sheet

B.$150,000 Warranty Revenue on its Income Statement and $50,000 Unearned Warranty Revenue on its Balance Sheet

C.$50,000 Warranty Revenue on its Income Statement and $150,000 Unearned Warranty Revenue on its Balance Sheet

D.$0 Warranty Revenue on its Income Statement and $200,000 Unearned Warranty Revenue on its Balance Sheet

7. A company enters into a contract in which variable consideration is offered. The company will either meet the deadline to receive the variable consideration or receive no variable consideration. Based on experience, the company expects that the most likely outcome is that it will meet the deadline to receive the variable consideration. How should the company determine the transaction price?

A.Use the most likely outcome approach and measure the transaction price by including the full amount of the variable consideration.

B.Use the expected value approach.

C.Use the most likely outcome approach and measure the transaction price by probabilityweighting each of the outcomes for variable consideration.

D.Use the contract sales price that does not include the variable consideration.

8. What type(s) of revenue will a contract with a significant financing component generate?

A.Unearned Revenue and Sales Revenue

B.Sales Revenue

C.Sales Revenue and Interest Revenue

D.Contract Asset Revenue and Sales Revenue

9. A company enters into a contract to sell 70 products to a customer for $80 each. After the company transfers 30 of the 70 products, the customer orders an additional 25 products. The contract is modified, and the additional 25 products are priced at $40 each. What is the price per product for the remaining 65 products (40 products from the original contract and 25 products from the modification)?

A.$40, the new price for the products specified in the contract modification

B.$80 for the remaining 40 from the original contract and $40 for the additional 25 products from the modification

C.$60, the average of the prices for the remaining products

D.$64.62, the blended price for the products from the original contract and the modification

10. Charlie Company modified an existing contract with a buyer to add on additional goods. The original goods and the additional goods may be used independently and are considered distinct. Charlie intends to modify the existing contract in a manner that will result in a new separate contract. How should Charlie price the additional goods to ensure that a new separate contract is created?

A.The consideration for the additional goods must be clearly articulated in the contract so that a blended price may be calculated.

B.The consideration should reflect a market index adjustment for the change in pricing between the original contract and the contract modification.

C.The consideration should reflect the average cost of the additional goods being sold.

D.The consideration for the additional goods should reflect appropriate standalone prices.

11. A company enters into a contract that includes three separate performance obligations. The standalone prices are not readily available for the performance obligations. How should the company proceed in allocating the transaction price?

A.The company is not able to allocate the transaction price at this time; it should wait until other customers engage the company for similar performance obligations and allocate the transaction price based on the pricing from those contracts.

B.Because the standalone pricing is not available, the company should allocate the transaction price evenly among the three performance obligations.

C.The company should estimate the standalone prices of the performance obligations in order to allocate the transaction price based on the proportion of the total standalone price represented by each performance obligation.

D.Because the company does not have the standalone pricing readily available, it should not separate the performance obligations and should allocate the sales price to a single performance obligation.

12. Shaw Company engages Maya Company to produce a large machine, install the machine, and train their employees on the machine. The machine, installation, and training are distinct, and Maya determines that the contract includes three separate performance obligations. The machine, installation, and training typically cost $800,000, $100,000, and $100,000 respectively when each is provided in a separate contract. Shaw and Maya agree to a total contract price of $920,000. How much of the contract price should Maya allocate to the machine, installation, and training, respectively?

A.$732,000; $94,000; $94,000

B.$800,000; $100,000; $100,000

C.$736,000; $184,000

D.$736,000; $92,000; $92,000

13. Clawson Company agrees to a contract that includes a piece of equipment, installation, and training. The buyer does not have the expertise available to install the equipment. The buyer does have access to other training resources, but decides to engage Clawson because of its reputation for highquality training. The contract includes a single transaction price covering the equipment, installation, and training. To which performance obligations should Clawson allocate the transaction price?

A.The entire transaction price should be allocated to the equipment because it is the primary reason for the contract and the primary performance obligation.

B.More information is required to determine the number of performance obligations to which the transaction price should be allocated.

C.The transaction price should be allocated to the equipment, installation, and training as three separate performance obligations.

D.The transaction price should be allocated to two performance obligations: the equipment and installation as a single performance obligation and the training as a separate performance obligation.