1. Under the earnings approach, if a company sells its product but gives the buyer the right to return the product, revenue from the sales transaction should be recognized at the time of sale a. the amount of future retums can be reasonably estimated. b. there is a transfer of the risks and rewards of ownership c. the market for returnable goods is untested. d. the amount of goods returned is likely to be high 2. Which of the following would not be included in a manufacturing company's balance sheet? a. Finished goods inventory b. Merchandise inventory Raw materials Inventory d. Work in process inventory C 3. Revenue is considered to be eamed when a. a company exchanges goods or services for cash or claims to cash. b. when it is realized or realizable. a company has substantially completed what it must do in order to be entitled to the benefits represented by the revenues. d. assets received by the company in exchange for goods or services are readily convertible to known amounts of cash or claims to cash. C b. 4. Liabilities related to non-cancellable purchase commitments are typically recognized: a on the date the contract takes effect. at the time of payment when the purchase is recorded in the accounting system in the penod a decline in market price occurs, 5. In many cases, an entity may have an implicit obligation even if it is not explicitly noted in a sales contract. This is called a(n) constructive obligation b. earnings obligation c. legal obligation d. onerous obligation