ACCT 301 Smartbook Chapter 6 Revenue Recognition solutions complete answers

ACCT 301 Smartbook Chapter 6 Revenue Recognition solutions complete answers 

 

The core revenue recognition principle stipulates that companies recognize revenue when goods or services are

 

Which of the following are key indicators that control of goods or services has been transferred to the customer? (Select all that apply.)

 

Which of the following services are commonly performed over time? (Select all that apply.)

 

Methods that can be used to estimate progress toward completion are referred to as       -based and       -based methods. (Enter one word per blank.)

 

For a promise to provide a good or service to be accounted for as a separate performance obligation, the good or service must be

 

The concept or principle that states that companies should recognize revenue when goods or services are transferred to customers for the amount the company expects to be entitled to receive in exchange for goods and services is referred to as the:

 

The transaction price is the amount the seller expects to ______ from the customer in exchange for providing goods and services.

 

Revenue recognition for services such as lending money and performing financial statement audits is typically

 

For the purpose of allocating the transaction price to multiple performance obligations, if a stand-alone selling price cannot be directly observed, the seller should

 

What method(s) can be used to estimate progress toward completion for the purpose of recognizing revenue over time? (Select all that apply.)

 

For a particular contract, the timing of revenue recognition is determined

 

Which of the following support(s) the conceptual basis for separating contractual promises into several performance obligations? (Select all that apply.)

 

Which of the following agreements may qualify as contracts? (Select all that apply.)

 

The       price is the amount the seller expects to be entitled to receive from the customer in exchange for providing goods and services. (Enter only one word.)

 

Prepayments by customers for future goods or services should initially be recorded as

 

Which of the following likely will lead to revenue recognition at a point in time? (Select all that apply.)

 

Which of the following situations may make the contract price less apparent? (Select all that apply.)

 

For the purpose of allocating the transaction price to multiple performance obligations, the stand-alone selling price of a specific good or service may be estimated if it

 

A contract is said to have variable consideration if the price depends on the outcome of

 

Revenue is recognized when the        obligation is satisfied. (Enter one word.)

 

Match the term with the correct description.

 

A contract is an agreement that creates        enforceable rights and obligations. (Enter only one word.)

 

Which methods may be used to estimate the stand-alone prices of goods and services? (Select all that apply.)

 

Jones Company receives a prepayment from a customer consistent with a promise to deliver 20 new office printers to Smith Inc. The prepayment (Select all that apply.)

 

Agreements that allow customers to use the seller’s intellectual property are referred to as        . (Enter only one word.)

 

A transaction price may be uncertain because the price

 

A seller recognizes contract liabilities, contract assets, and accounts receivable on separate lines of its             . (Enter one word per blank.)

 

Berta Company owns inventory prior to a customer ordering it from Norman Company. If a customer returns the merchandise, Berta Company owns the returned inventory. Berta Company is a(n)       . (Enter only one word.)

 

The stand-alone price of a good or service may be estimated using the adjusted market assessment approach, the expected cost plus margin approach, or the        approach. (Enter only one word.)

 

Long-term contracts require careful consideration in identifying performance obligations because these type of contracts typically include many products and services that

 

Licenses typically allow customers to use the seller’s ____ property.

 

Which of the following differs between revenue recognized over time and revenue recognized at completion?

 

Which of the following must a seller recognize as separate line items on the balance sheet? (Select all that apply.)

 

Which of the following are included in the journal entry required to record the collection of cash from a customer related to a long-term construction contract? (Select all that apply.)

 

Which of the following are indicators that a company is a principal? (Select all that apply.)

 

Malone Corp. properly recognizes revenue upon completion of a long-term construction project. Malone has the following information for a 3-year contract.

 
Year 1
Year 2
Year 3
Billings on contracts
10,000
10,000
30,000
Construction costs
8,000
8,000
8,000
The journal entry required at the end of the contract to recognize revenue and expenses will include (Select all that apply.)

 

A long-term contract that includes many products and services that are capable of being distinct, may be accounted for as a single performance obligation because

 

Revenue recognized each period is determined by multiplying total estimated revenue by

 

Which of the following will not differ between revenue recognized over time and revenue recognized at completion? (Select all that apply.)

 

Kline Corp. recognizes revenue over time to account for long-term contracts. The contract price is $5 million, total construction costs are $3.75 million, actual costs incurred during the first year are $1.5 million, and the revenue recognized is $2 million. The journal entry to record revenue during year 1 is: (Select all that apply.)

 

As compared to revenue recognition over time, the total amount of gross profit recognized related to revenue upon completion is:

 

Which of the following are included in the journal entry required to record construction costs for a long-term construction contract? (Select all that apply.)

 

True or false: An estimated overall loss on a long-term contract is fully recognized in the first period the loss becomes evident, regardless of the revenue recognition method used.

 

When is gross profit recorded in the construction in progress account for a long-term contract accounted for upon completion?

 

The formula: total estimated revenue times percentage completed to date less revenue recognized in prior periods is used to measure:

 

When revenue related to a long-term construction contract is recognized over time, the journal entry to recognize revenue includes which of the following? (Select all that apply.)

 

Which method provides a better measure of a company's economic activity each period?

 

When is a loss recognized on a long-term contract?

 

 

Arthur Inc. provides services to consulting clients. Arthur should recognize the related revenue when            

Being separately identifiable in the contract requires that the goods or services are              

Consistent with ASU 2014-09, promises to transfer goods or services to customers are referred to as:           

Control requires that the customer has ______ with respect to the goods or services and obtains the benefits.            

The final step used to apply the core revenue recognition principle is to recognize revenue              

The first step used to apply the core revenue recognition principle is:            

For contracts with multiple performance obligations, the seller allocates the transaction price to each performance obligation                 

Goods or services that are not distinct are ____ and treated as a ____ performance obligation.            

Kunze Company sells bundled products to a customer and correctly identifies several separate performance obligations. Kunze should allocate the total contract price in proportion of each obligation’s             

On January 1, Roberts Company receives $36,000 in cash for providing internet access to customers for the upcoming year. On January 1, Roberts should debit cash and credit                 

Performance obligations are satisfied when the seller transfers         of goods or services to the customer.               

Promises to transfer goods or services to a customer are referred to as        obligations.                 

Revenue related to a company providing cleaning services to a customer for a period of time should be recognized                   

Sadie performs a service that satisfies just one of the three conditions for considering whether revenue should be recognized over time. Sadie should recognize revenue           

When a performance obligation is satisfied over time, revenue is recognized in proportion to the amount of the               

Which of the following conditions must be met for goods or services to be distinct? (Select all that apply.)               

Which of the following promises likely would include multiple distinct performance obligations?                  

Which of the following transactions would likely involve multiple performance obligations?              

Xavier Inc. is adding two more floors to Tamara Company’s existing office building. Revenue related to this service likely should be recognized               

 

 

Commitment to performing an obligation and enforcing related rights represents a critical aspect of a(n)                 

A contract is said to have        consideration if the price depends on the outcome of future events.             

The inflow of cash or other assets that a business receives when it provides goods or services to customers is referred to as             

Inflows or other enhancements of assets or settlements of an entity’s liabilities from delivering or producing goods, rendering services, or other activities that constitute its ongoing major or central operations are                 

Munch Inc. delivers various types of construction materials to a customer’s building site. Over an 18-month period, Munch’s employees utilize Munch’s machinery and tools to construct a new office building for the customer. Munch identifies only one performance obligation related to this contract because              

Prepayments for future goods or services should be:             

Typical costs included in a construction project include          

What account tracks the inflow of net assets that occurs when a business provides goods or services to its customers?                   

What is the correct journal entry to recognize profit for a long-term construction project for which revenue is recognized over time?            

What journal entry should be made to recognize accounts receivable for long-term construction projects?               

          Which of the following costs are included in a long-term construction contract? (Select all that apply.)           

Which statements are true regarding revenue recognition over time and upon completion? (Select all that apply.)              

Who carries risk and rewards associated with collecting the contract price?               

Who earns a commission for helping seller transact with buyer?                  

Who is not directly involved with the transaction?                

 

 

The amount at which a good or service is sold separately under similar circumstances is referred to as the               

Arthur Inc. provides services to consulting clients. Arthur should recognize the related revenue when            

The essential difference between revenue recognition over time and upon completion relates to the             

For estimating variable consideration, if there are several possible outcomes, the ______ method will tend to be most appropriate; if there are two possible outcomes, the ______ method will tend to be most appropriate            

Munch Inc. delivers various types of construction materials to a customer’s building site. Over an 18-month period, Munch’s employees utilize Munch’s machinery and tools to construct a new office building for the customer. Munch identifies only one performance obligation related to this contract because              

Prepayments for future goods or services should be (Select all that apply.)                

Typical costs included in a construction project include          

What is the correct journal entry to recognize profit for a long-term construction project for which revenue is recognized over time?            

Which of the following costs are included in a long-term construction contract? (Select all that apply.)           

Which of the following methods are appropriate for estimating variable consideration? (Select all that apply.)            

 

 

Adding another performance obligation to an existing contract that requires that the customer pay an additional price equal to the added good or service’s stand-alone price results in a contact modification that is treated as a(n)                   

The amount at which a good or service is sold separately under similar circumstances is referred to as the_____                

The amount of revenue that is recognized each period for a long-term contract that qualifies for revenue recognition over time is determined based on                

The amount received for an extended warranty is initially .                

A(n) _____ warranty represents the cost of satisfying the performance obligation to deliver products of acceptable quality.           

Arthur Inc. provides services to consulting clients. Arthur should recognize the related revenue when            

Because the exact cost of a quality-assurance warranty is unknown when the related product is sold, the cost is .              

Being separately identifiable in the contract requires that the goods or services are________              

The collectability criteria specifies that a contract only exists for the purpose of revenue recognition if the seller believes that it is                  

Consistent with ASU 2014-09, promises to transfer goods or services to customers are referred to as_______              

Consistent with the realization principle, historically, revenue was recognized if two conditions were satisfied. These were              

A contract does not exist if               

The contract price received for an extended warranty is recognized as revenue                    

The cost of a quality-assurance warranty is recognized .                   

The cost of a quality-assurance warranty is recognized during the year of sale and debited to ____ and credited to ______.           

The definition of probable under IFRS is _____ the definition in U.S. GAAP.                 

Donau Company sells a video streaming devices for $100. A one-year subscription for unlimited video streaming costs $120. Alternatively, customers can rent videos on demand or subscribe to a competing service. On February 1, Robert purchases both the steaming device and signs-up for one year of service. How much revenue should Donau recognize for the month of February?            

The first step used to apply the core revenue recognition principle is______               

For contracts with multiple performance obligations, the seller allocates the transaction price to each performance obligation______          

For performance obligations performed over time, assessment of progress toward completion that results in an adjustment to the related revenue is treated as a                 

From a financial reporting perspective the “sales returns” account is a:           

From a financial reporting perspective the “sales returns” account is a(n) ________ _________ account.              

Good Buy Electronics Inc. encourages its customers to purchase a separate warranty that protects products for up to five years. This warranty represents a(n)                   

A good or service is capable of being distinct only if the customer____________          

Goods or services that are highly interdependent, or if one significantly modifies another, typically .             

Holly Inc. sells multi-function office equipment with an extended warranty, which is included in the $10,000 contract price. Holly should recognize the extended warranty (Select all that apply.)               

If a company hires a contractor to construct its new headquarters building, the delivery of the materials and the labor and oversight services provided by the contractor represent_________            

If a contract qualifies for revenue recognition over time, revenue is recognized based on progress toward________                   

The inflow of cash or other assets that a business receives when it provides goods or services to customers is referred to as_______              

In step 1 of revenue recognition,                  

Key considerations when applying the five steps to revenue recognition include: (Select all that apply.)          

Kunze Company sells bundled products to a customer and correctly identifies several separate performance obligations. Kunze should allocate the total contract price in proportion of each obligation’s .           

Main Company sells a video streaming device for $100. A one-year subscription to unlimited video streaming costs $150. Alternatively, customers can rent videos on demand or subscribe to a competing service. Customers may purchase the streaming device together with the one-year subscription for $200. For customers who purchase the streaming device with the 1-year subscription, Main should allocate how much of the total contract price to the unlimited streaming access?              

Main Company sells video streaming devices for $100. A one-year subscription to unlimited video streaming costs $150. Alternatively, customers can rent videos on demand or subscribe to a competing service. In an effort to boost December sales prior to the release of a second generation device, Main offers the device at a sharp discount. The discount specifically applies to the streaming device. If during December a customer purchases the streaming device with a 1-year subscription for $210, Main should allocate how much of the total contract price to the steaming device?                   

Margery sells 100 TV top boxes to customers for $90 each and credited sales revenue for $9,000. Margery estimates that six of the units will be returned for a full refund of $540. What additional journal entry should Margery make?                   

Margery sells 100 TV top boxes to customers for $90 each. Margery estimates that 6% of the units will be returned for a full refund. Margery should report net sales revenue of:            

Match the standard with the definition of probable.              

Match the term with the correct description.             

Mueller Company sold merchandise costing $120,000 for $240,000. Mueller estimates that merchandise costing $5,000 will be returned for a refund of $10,000. Mueller should report net sales of:              

Neither the seller nor the customer have performed any obligation under a written agreement. What additional condition would disqualify this as a contract for purposes of revenue recognition?               

On January 2, Main Company sells a video streaming device for $100. A one-year subscription to unlimited video streaming costs $150. Alternatively, customers can rent videos on demand or subscribe to a competing service. Customers may purchase the streaming device together with the one-year subscription for $200. Main should recognize revenue related to the video streaming device on______                

Options for additional goods or services are considered performance obligations if they provide a material right to the customer that the customer .                 

Options for additional goods or services that are treated as separate performance obligations           

Options for additional goods or services that are treated as separate performance obligations require allocation of the contract price based on their estimated              

Performance obligations are satisfied when the seller transfers____________ of goods or services to the customer.                

Place the five steps used to apply the core revenue recognition principle into the correct order.                  

Prepayments for future goods or services should be (Select all that apply.)                

The previous requirement for revenue recognition, which dictated that the earnings process must be virtually complete and the collectiblity of the related assets reasonably assured was referred to as the__________            

Promises to transfer goods or services to a customer are referred to as___________obligations.           

The seller’s belief that it is probable that it will collect substantially all of the amount it is entitled to receive under the contract is referred to as the                  

Superb Vision sells 100 pairs of eyeglasses for $400 each. Superb Vision delivers each pair of glasses with a coupon that entitles the customer to purchase an additional pair of glasses of the same type at a 50% discount. Based on past experience, Superb Vision estimates that 20% of the coupons will be redeemed by customers. Upon delivery of the 100 eyeglasses, Superb should recognize revenue equal to: (round to whole dollars)                  

Thomson Tractor Supply sells farm equipment and offers its customers the option to purchase an extended warranty that covers the product for three years beyond the standard one-year manufacturer’s warranty. In January 2021, Thomson records cash sales for three tractors for $75,000 each, and seven more tractors with extended warranties for $77,000 each. Which of the following statements are true? (Select all that apply.)             

True or false: A prepayment from a customer typically creates a performance obligation.                  

True or false: A quality-assurance warranty is a separate performance obligation.                 

True or false: Most long-term contracts qualify for revenue recognition over time.                

True or false: Most long-term contracts should be viewed as single performance obligations.            

Typical costs included in a construction project include .                  

A warranty that is normally sold separate and covers either a longer period of time and or additional risks is a(n)                   

When the seller transfers control of goods or services to the customer the related _____ is complete.             

Which of the following likely would be treated as a separate performance obligation related to the purchase of a pair of prescription eye glasses?               

Which of the following likely would qualify for revenue recognition over time?           

Which of the following promises likely would include multiple distinct performance obligations? (Select all that apply.)                   

Which of the following transactions would likely involve multiple performance obligations?