Question
Question 1 The core revenue principle states that Companies recognize revenue when the earnings process is virtually complete and it is probable that payments will
Question 1
The core revenue principle states that
Companies recognize revenue when the earnings process is virtually complete and it is probable that payments will be received. | ||
Companies recognize revenue when goods or services are transferred to customers for the amount the company expects to be entitled to receive in exchange for those goods or services. | ||
Companies recognize revenue when goods or services are transferred to the customer and payments are received. | ||
Companies recognize revenue when the goods or services are transferred to the customer in an arm's length transaction. |
4.35 points
Question 2
Revenue likely is recognized over time for all of the following arrangements except for
Bank earning interest on a long term loan | ||
Construction of a building | ||
Providing a two-year gym membership | ||
Manufacturing generally stocked items ordered by a favored customer |
4.35 points
Question 3
Maas LLP developed software that helps farmers to plow their fields in a manner that prevents erosion and maximizes the effectiveness of irrigation. Sunny Dale paid a licensing fee of $20,000 for a copy of the software. Although Sunny Dale can use the software as long as it wants, Maas expects that Sunny Dale will use the software for approximately 5 years. Maas does not anticipate any further interaction with Sunny Dale following transfer of the license. How much revenue should Maas recognize in the first year of the contract?
$0 | ||
$4,000 | ||
$5,000 | ||
$20,000 |
4.35 points
Question 4
Consider the following three scenarios: I. ABC Lawncare performed lawn maintenance services for Drake Inc. on June 1st, and received payment of $500 for those services. II. On June 1st, Melly Corp. received payment for 100 pounds of raw material to be delivered to Drake Inc. in 6 months III. Lodo, LLC collected cash on June 1st for services rendered on May 1st. Given these scenarios, revenue can not be recognized on June 1st for
I, II | ||
I only | ||
II, III only | ||
III only |
4.35 points
Question 5
For contracts that include more than one separate performance obligation:
Revenue is recorded over time at the fair value of each performance obligation. | ||
Revenue is recognized in the amount of the contract price on the date the last separate performance obligation is satisfied. | ||
The contract price is allocated to each performance obligation in proportion to the obligations' stand-alone selling prices. | ||
Revenue is recognized in the amount of the contract price on the date the contract is signed. |
4.35 points
Question 6
On June 1st, Lucy & Bros received an order for 500 cupcakes. Lucy delivered the cupcakes to the client on June 25th. A $50 deposit was received on June 5th and the remaining $450 was paid on June 30th. Lucy likely would recognize revenue on
June 1st | ||
June 5th | ||
June 25th | ||
June 30th |
4.35 points
Question 7
Goods and services are capable of being distinct if:
The seller regularly sells the good or service separately. | ||
A buyer could use the good or service on its own. | ||
A buyer could use the good or service in combination with goods or services the buyer could obtain elsewhere. | ||
The seller regularly sells the good or service separately, or the buyer could use the good or service on its own, or the buyer could use the good or service in combination with goods or services the buyer could obtain elsewhere. |
4.35 points
Question 8
Which of the following is one of the steps for recognizing revenue?
Identify the performance obligations of the contract. | ||
Determine whether bad debts can be reasonably estimated. | ||
Estimate the total transaction price of the contract based on fair value. | ||
Allocate all revenue to the performance obligation with the largest stand-alone selling price. |
4.35 points
Question 9
The Ultimate Frisbee League (UFL) licenses its trademark to Tank-Skin Apparel. Under the license arrangement, Tank-Skin pays the UFL a $1 million initial license fee plus a bonus when annual sales of Tank-Skin merchandise reach a threshold. The license agreement is for 4 years. Assume that the UFL anticipates that, in addition to receiving the $1 million license fee, it will receive a bonus of $2 million in year 1 of the contract and a bonus of $3 million in years 2-4 of the contract based on Tank-Skin's sales. Also assume that the UFL is convinced that it is probable there will not be a significant reversal of any revenue recognized with respect to the bonus in subsequent periods. At the inception of the contract, what is the amount of transaction price that the UFL would estimate with respect to this license arrangement?
$0 | ||
$1,000,000 | ||
$3,000,000 | ||
$12,000,000 |
4.35 points
Question 10
Which of the following is not a characteristic of a distinct good or service?
It can be used on its own or in combination with other goods or services the seller could obtain elsewhere | ||
It is not highly dependent on other goods or services in the contract | ||
It has a stand-alone selling price | ||
It is not interrelated with other good or services in the contract |
4.35 points
Question 11
Bull'sEye sells gift cards redeemable for Bull'sEye products either in-store or online. During 2016, Bull'sEye sold $2,000,000 of gift cards, and $1,800,000 of the gift cards were redeemed for products. As of December 31, 2016, $150,000 of the remaining gift cards had passed the date at which Bull'sEye concludes that the cards will never be redeemed. How much gift card revenue should Bull'sEye recognize in 2016?
$2,000,000 | ||
$1,950,000 | ||
$1,850,000 | ||
$1,800,000 |
4.35 points
Question 12
Which of the following is not an indicator that the customer is likely to have control over a good?
Asset warehoused by seller-affiliated third party | ||
Accepted the asset | ||
Legal title to the asset | ||
Physical possession of the asset |
4.35 points
Question 13
On June 1st, Joseph & Company received a $500 deposit for 80 cases of wine. On June 10th the customer identified specific vintages that are included in Joseph's inventory, and asked that Joseph not ship the wine until June 20 so the customer could ready space to store the wine, so Joseph set those wines aside for the customer, boxed and ready for shipment to the customer. On June 20th the wine was shipped and delivered to the customer. Joseph likely would recognize revenue on
June 20th. | ||
June 10th. | ||
June 1st. | ||
Upon consumption of the wine by the customer. |
4.35 points
Question 14
Companies recognize revenue only when
A contract is reasonably likely to exist | ||
A performance obligation is designated in a written contract | ||
A written contract is in place and payment is variable | ||
Control over goods or services has been transferred from the seller to the customer |
4.35 points
Question 15
For a typical manufacturing company, the most common critical point for recognizing revenue is the date:
An order is received. | ||
Production is completed. | ||
The product is delivered. | ||
Payment is received. |
4.35 points
Question 16
Stayman Associates has sold a good to a buyer and wants to recognize revenue. Which of the following is an indicator that control of a good has passed from Stayman to the buyer?
Buyer has scheduled delivery. | ||
Buyer has a strong credit history, such that bad debts are reasonably estimable. | ||
Buyer has not scheduled delivery. | ||
Buyer has assumed the risk and rewards of ownership. |
4.35 points
Question 17
On November 1, 2016, Taylor signed a one-year contract to provide handyman services on an as-needed basis to King Associates, with the contract to start immediately. King agreed to pay Taylor $4,800 for the one-year period. Taylor is confident that King will pay that amount, but payment is not scheduled to occur until 2017. Taylor should recognize revenue in 2016 in the amount of
$0. | ||
$800. | ||
$2,400. | ||
$4,800. |
4.35 points
Question 18
Which of the following is not one of the five steps for recognizing revenue?
Identify the contract with a customer | ||
Recognize revenue when all the performance obligations have been satisfied | ||
Identify the separate performance obligation(s) in the contract | ||
Allocate the transaction price to the separate performance obligations |
4.35 points
Question 19
The Ultimate Frisbee League (UFL) licenses its trademark to Tank-Skin Apparel. Under the license arrangement, Tank-Skin pays the UFL a $1 million initial license fee plus a bonus when annual sales of Tank-Skin merchandise reach a threshold. The license agreement is for 4 years. How much of the $1 million initial license fee should the UFL recognize as revenue in the first year of the contract?
$0 | ||
$250,000 | ||
$1,000,000 | ||
Cannot tell from information given. |
4.35 points
Question 20
Pita Pal sells fast-food franchises. Pita Pal receives $75,000 from a new franchisee for providing initial training, equipment, and furnishings that together have a stand-alone selling price of $75,000. Pita Pal also receives $36,000 per year for use of the Pita Pal name and for ongoing consulting services (starting on the date the franchise is purchased). Rachel became a Pita Pal franchisee on March 1, 2016, and on May 1, 2016 Rachel had completed training and was open for business. How much revenue in 2016 will Pita Pal recognize for its arrangement with Rachel?
$0 | ||
$75,000 | ||
$99,000 | ||
$111,000 |
4.35 points
Question 21
Which of the following is typically true for a bill-and-hold arrangement?
Revenue is recognized at the point in time when the arrangement is made. | ||
Revenue is recognized at the point in time when goods are manufactured. | ||
Revenue is recognized at the point in time when the delivery of goods is made. | ||
Revenue is recognized at the point in time at which payment from the customer is received. |
4.35 points
Question 22
Which of the following is not true?
Licensing fees are recognized as revenue over time for any licenses for which the seller expects its ongoing activities to affect the benefits that the buyer receives from intellectual property. | ||
License fees are recognized over time for any license that is viewed as providing a right of access. | ||
License fees are recognized as revenue at a point in time if the buyer expects that the seller's future activities will not affect the benefit the buyer derives from the intellectual property. | ||
Licensing fees are recognized as revenue at the end of the license period, when the seller has completed its performance obligation to provide access to its intellectual property. |
4.35 points
Question 23
Which of the following is not one of the five steps for recognizing revenue?
Recognize revenue when (or as) each performance obligation is satisfied. | ||
Determine the transaction price. | ||
Allocate the transaction price to each performance obligation. | ||
Estimate variable consideration. |
4.35 points
Save and Submit
Click Save and Submit to save and submit. Click Save All Answers to save all answers.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started