1.When should a consignor recognize revenue from a consignment sale?

a. When the consignor sells the goods to the consignee

b. At the point of time indicated in the contractual arrangement between the consignor and the consignee

c. When the consignee sells the goods to the end customer

d. Any of these

2.Which of the following statements is correct?

a.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.

b.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.

c.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 customers.

d.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.

3.Which of the following indicates that an entity is acting as an agent rather than principal?

a.The entity is primarily responsible in fulfilling the contract

b.The entity does not have inventory risk

c.The entity bears the loss if the customer fails to pay the sale price.

d.The entity has the discretion in establishing the price at which the good or service is sold to a customer.

4.In accounting for sales on consignment, sales revenue and the related cost of goods sold should be recognized by the

a.consignor when the goods are shipped to the consignee.

b.consignee when the goods are shipped to the third party.

c.consignor when notification is received that the consignee has sold the goods.

d.consignee when cash is received from the customer.

5.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 upon the signing of the contract

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

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

d.deferred and amortized over the license period

6.S1: If another party is primarily responsible for fulfilling a contract with a customer, this may not indicate that the entity is an agent. S2: Under a consignment arrangement, the consignor recognizes revenue equal to the gross sales price.

a.Both statements are correct

b.Both statements are incorrect

c.Only S1 is correct

d.Only S2 is correct

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

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

c.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.

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

8.On January 1, 20x1, an entity grants a franchisee the right to operate a restaurant in a specific market using the entity's brand name, concept and menu for a period of ten years. The entity has granted others similar rights to operate this restaurant concept in other markets. The entity commonly conducts national advertising campaigns, promoting the brand name, and restaurant concept generally. The franchisee will also purchase kitchen equipment from the entity. The entity will receive 950,000 upfront (50,000 for the kitchen equipment and 900,000 for the franchise right) plus a royalty, paid quarterly, based on 4% of the franchisee's sales over the life of the contract. The 50,000 amount reflects the stand-alone selling price of the kitchen equipment. The entity delivers the kitchen equipment to the customer on February 1, 20x1. The customer commences business operations on April 1, 20x1 and reports total sales of 5,000,000 for the year. How much total revenue should the entity recognize from the contract in 20x1?

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

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

c.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.

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

10.Under the "cost-to-cost" method, the percentage of completion may be computed as

a.Total costs incurred to date multiplied by the Estimated total costs to complete

b.Total costs incurred to date divided by the Estimated total costs to complete

c.Total costs incurred to date multiplied by the Estimated total cost to complete

d.Total costs incurred to date divided by the sum of Total costs incurred to date and Estimated costs to complete

11.In September 20x1, DEF Co. consigned 3,200 books costing 60 and retailing for 100 each to GHI Co., debiting Accounts Receivable and crediting Sales for the retail sales price. Freight cost of 3,200 was debited to Freight Expenses by the consignor. On September 30, 20x1, DEF Co. received from GHI Co. the amount of 142,020 in full settlement of the balance due, and Accounts Receivable was credited for this amount. The consignor deducted a commission of 20 for each book sold, a total of 180 for delivery expenses and a total of 200 for advertising expense. How many books were actually sold by GHI. Co.?

12.Entity consigns goods to Entity B. Normally, end customers buy over-the-counter from Entity B. However, in some cases, Entity B ships the goods to customer. Entity B deducts the shipping cost from the amount remitted to Entity A. How should Entity A account for the shipping cost?

a.Freight out

b.Freight in

c.Receivable

d.Commission Expense

13.Which of the following does not indicate that the nature of an entity's promise to transfer a license is to provide the customer the right to access the entity's intellectual property as it exists throughout the license period?

a.The intellectual property to which the customer has rights changes throughout the license period.

b.The entity continues to be involved with its intellectual property

c.The contract requires, or the customer reasonably expects, that the entity will undertake activities that significantly affect the intellectual property to which the customer has rights and the customer is exposed to any positive or negative effects of those activities.

d.The customer can direct the use of, and obtain substantially all of the remaining benefits from, the license at the point in time at which the license is granted.

14.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 February 1, 20x1

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

15.According to PFRS 15, how does an entity account for a promise in the contract to transfer a good or service that is not distinct?

a.The entity shall not recognize any revenue from the promise to transfer a non-distinct good or service; any consideration received therefrom is treated as a liability.

b.The entity shall recognize revenue from a promise to transfer a non-distinct good or service at the earlier of the following events: the entity has no remaining obligation in the contract and the contract is terminated and the consideration received is non-refundable.

c.The entity shall combine the non-distinct good or service with the other promises in the contract and treat the combined promises as a single performance obligation.

d.The entity shall ignore the promise to transfer a non-distinct good or service and shall account only those promises in the contract to transfer distinct goods or services.

16.On Jan. 1, 20x1, Hurt Co. entered into a franchise agreement with Hero Co. The franchise contract gives Hero Co. the right to use Hurt's trademark and proprietary processes for a period of 4 years. The franchise requires payment of an upfront fee of 1,000,000, payable at contract inception, and 5% monthly royalty based on sales. Aside from the granting of the license, the franchise agreement also requires Hurt Co. to undertake pre-opening activities to setup the contract and post-commencement activities, such as research and development and marketing campaigns, to support the intellectual property. Although the activities do not result in the direct transfer of a good or service to Hero Co. as the activities occur, it is expected that Hero Co. will benefit from them. All the necessary preparations were completed and Hero Co. started business operations on January 31, 20x1. Hero had total sales of 9,000,000 in 20x1. How much revenue would Hurt Co. recognize in 20x1?

17.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 deposit upon entering into the contract and the deposit is refundable only if the entity fails to complete construction of the unit in accordance with the contract. The remainder of the contract price is payable on completion of the contract when the customer obtains physical possession of the unit. If the customer defaults on the contract before completion of the unit, the entity only has the right to retain the deposit. Which of the following statements is correct?

a.The entity's performance obligation is satisfied at a point in time because the entity does not have an enforceable right to payment for performance completed to date.

b.The entity's performance obligation is satisfied over time because the contract is a construction contract.

c.The entity's performance obligation is satisfied at a point in time because it takes a short period of time to construct just one unit in a multi-unit complex.

d.The entity's performance obligation is satisfied over time because it takes a long-period of time to develop all the units in the multi-unit residential complex.

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

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

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

d.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.