1) Which of the following is typically not a characteristic of a constructive obligation?

a.It is a term that is explicitly stated in the contract.

b.It may be created through past practice or experience.

c.It may be created though a signal to potential customers.

d.It is not legally enforceable.

2) At which point in the revenue recognition process can revenue actually be recognized?

a.When the contract is signed.

b.When the price has been agreed to.

c.When all performance obligations have been satisfied.

d.At the earliest of the above three times.

3) A vacuum cleaner manufacturer sells a vacuum cleaner with a 90-day warranty included and a separate optional 3-year extended warranty. What are the distinct performance obligations in this sale contract?

a.The vacuum cleaner, the 90-day warranty, and the 3-year warranty; i.e., all three are distinct obligations.

b.The vacuum cleaner and the 90-day warranty comprise one obligation, and the 3-year warranty is another.

c.The vacuum cleaner and the 3-year warranty comprise one obligation, and the 90-day warranty is another.

d.The vacuum cleaner and both warranties are all together one obligation.

4) Under the earnings approach, revenue from selling products is generally recognized

a.at the point of delivery.

b.at the completion of production.

c.after costs are recovered.

d.as cash is collected.