1.Schultz Fine Arts enters into a contract to build a sculpture for the Art Gallery of Buffalo. The contract is for $50,000 with a $10,000 performance bonus if the company can complete the sculpture one month early. Based on similar contracts in the past, Schultz believes that there is a 60% chance that the company can complete the project one month early. How should Schultz Fine Arts account for this revenue arrangement if the company uses the probability-weighted method?

Select one:

a.$54,000

b.$60,000

c.$50,000

d.$56,000

2.An initiation fee for an exclusive country club is mostly likely recorded as a:

Select one:

a.bill-and-hold arrangement.

b.nonrefundable upfront fee.

c.repurchase agreement.

d.principal-agent relationship.

3.Which of the following is true regarding Net Operating Losses?

Select one:

a.Taxpayers use losses of one year to offset the profits of other years

b.Companies pay no income taxes for a year in which they incurs a net operating loss

c.Companies can reduce future taxes payable

d.All of the above

4.McDonalds sells goods to BK for $500,000, payment due in two installments, the first installment payable in 18 months and the second payment due 6 months later. The present value of the future payments is $464,000. How much revenue would McDonalds recognize at the point of sale?

Select one:

a.$250,000

b.$0

c.$464,000

d.$500,000

5.In order for a transaction to be a valid bill-and-hold arrangement, which factor should be considered?

Select one:

a.The product must be identified separately as belonging to the customer.

b.The product currently must be ready for physical transfer to the customer.

c.The seller cannot have the ability to use the product or to direct it to another customer.

d.All of the above