Contract and Revenue Recognition Quiz

A contract does not exist if...

• The contract has no fixed duration and can be terminated or modified by either party at any time

• The contract was not approved in a written form

• The parties of the contract have reached unanimous consent regarding termination of the contract

• Each party to the contract has the unilateral enforceable right to terminate a wholly unperformed contract without compensating the other party

A contract is wholly unperformed if...

• All of the above

• The entity is not yet entitled to receive any consideration in exchange for promised goods or services

• The entity has not yet received any consideration in exchange for promised goods or services

• The entity has not yet transferred any promised goods or services to the customer

A performance obligation is satisfied over time if:

• The customer does not receive or consume the benefits provided by the entity's performance until the obligation is completely satisfied

• The entity does not have an enforceable right to payment for the performance that has been completed to date

• The entity's performance creates an asset which has an alternative use to the entity

• The entity's performance creates an asset that the customer controls as it is created

A company enters into a contract to supply three distinct products to a customer. How should the price be allocated to performance obligations?

• Product X £10,367, Product Y £21,867, Product Z £25,366

• Product X £11,250, Product Y £21,600, Product Z £24,750

• Product X £19,200, Product Y £19,200, Product Z £19,200

• Product X £12,500, Product Y £24,000, Product Z £27,500

An entity shall recognize a refund liability if the entity receives consideration from a customer and expects to refund some or all of that consideration to the customer.

• False

• True

If a contract with a customer provides a warranty, then the warranty always represents a separate performance obligation and part of the transaction price must be allocated to it. True or False?

• False

• True

Entity shall recognize revenue to depict the transfer of promised goods or services to customers in the _______ amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services

• Gross

• Residual

• Cumulative

• Net

A company enters into a contract to build a factory for a customer. What is the expected value of the transaction price for this contract?

• 2.025m

• 2.125m

• 1.975m

• 2m

A law firm enters into a contract to advise in a lawsuit for a client. If the client wins, they will pay 2000 to the law firm. If not, the payment is 1500.
The law firm estimates that there is a 75% probability that the client will win and 25% probability that it will lose in this lawsuit.
What is the expected value of the transaction price for this contract?

• 2000

• 1875

• 1250

• 1500

Which of the following is an exception for application of IFRS 15?

• Financial audit contracts

• Lease contracts, Insurance contracts

• Insurance contracts, Pharmaceutical contracts

• Lease contracts