ACCT 325 ch6 MCQ_review session

Front

Companies recognize revenue only when:

Back

control over goods or services has been transferred from the seller to the customer.

Front

Which of the following is one of the steps for recognizing revenue?

Options:
Determine whether bad debts can be reasonably estimated.
Allocate all revenue to the performance obligation with the largest stand-alone selling price.
Estimate the total transaction price of the contract based on fair value.
Identify the performance obligations of the contract.

Back

Identify the performance obligations of the contract.

Front

Which of the following is not one of the five steps for recognizing revenue?
- Determine the transaction price.
- Allocate the transaction price to each performance obligation.
- Estimate variable consideration.
- Recognize revenue when (or as) each performance obligation is satisfied.

Back

Estimate variable consideration.

Front

For contracts that include more than one separate performance obligation:

Back

The contract price is allocated to each performance obligation in proportion to the obligations' stand-alone selling prices.

Front

Which of the following is considered a performance obligation? Quality-assurance warranties on electronic products, Extended warranties on electronic products, Up-front registration fees for a gym membership, A processing fee to obtain a bank loan

Back

Extended warranties on electronic products

Front

Which of the following is not a performance obligation?

A right of return, A good that the seller could sell separately and that is separately identifiable from other goods or services in the contract, An extended warranty, An option for a customer to purchase goods under terms that are more advantageous than those enjoyed by other customers

Back

A right of return

Front

Which of the following statements is most true?
- Variable consideration means that the transaction price is uncertain.
- Basing an estimate on the most likely amount is always superior to basing an estimate on the expected value.
- The most likely estimated amount is estimated by multiplying the possible amounts with their respective probability of occurrence.
- When the transaction price is uncertain, revenue should not be recognized.

Back

Variable consideration means that the transaction price is uncertain.

Front

When a seller offers a right of return, which of the following is true? Sales are shown gross of returns, as returns are ignored for purposes of income statement presentation. Sales are shown gross of returns, as returns are treated as an expense. Sales are shown net of only actual returns in the income statement. Sales are shown net of estimated returns in the income statement.

Back

Sales are shown net of estimated returns in the income statement.

Front

Which of the following applies to a seller who is an agent?
Options: Charges a commission for each transaction, Liable for the delivery of goods or services to the client, Warehouses inventory, Records revenue at full transaction price

Back

Charges a commission for each transaction

Front

Assume a contract for the sale of goods specifies that payment is to be made 15 months prior to delivery of a product. The seller is likely to do which of the following with respect to the time value of money over the life of the contract? Options: Ignore the time value of money, Recognize additional cost of goods sold, Recognize interest revenue, Recognize interest expense

Back

Recognize interest expense