Exam 4: Revenue Recognition and the Statement of Incom

During the current year, First Flex Corporation sold $1,250,000 in goods that cost $750,000. Cash sales were $500,000 and credit sales $750,000. First Flex collected $500,000 of the credit sales during the year. What amount of revenue should Flex recognize for the year under the revenue recognition principle?

When there has been a change in the number of preferred shares during the period, a weighted average number of shares must be determined for the EPS calculation.

Comprehensive income must be reported on a separate statement called the Statement of Comprehensive Income.

In which of the following businesses would the delivery of the product and the collection of cash occur at the same time?

On May 1, Yeung Enterprises paid rent for 3 months in advance. The total payment was $1,200. How much rent expense should Yeung recognize for the month of May?

Accounting standards identify two revenue recognition criteria that must be met before a company selling goods can recognize revenue.

Duguay Designers took a $1,500 deposit from a customer when they signed the contract to paint the customer's residence. It took them three weeks to complete the job. On completion the customer paid the $3,500 balance. How should Duguay Designers recognize revenue for this job?

Use the following information for questions 57-58. Dinca Construction Co. agreed to build a bridge for Gotham City. The contract specifies that construction will take three years and Dinca will receive $12,500,000. The company expects annual costs to be $3,500,000; $2,750,000; and $1,800,000. -Assume Dinca uses the percentage of completion method. Revenue recognized in year three will be

The revenue recognition method most often used for short-term construction projects is to recognize revenue

Which of the following criteria must be satisfied in order to recognize revenue for the receipt of interest, royalties, and dividends?

When the customer takes the goods away, the selling company no longer has control over the goods.

Earnings are considered to be of higher quality if

If it is probable that economic benefits will flow to the company and the amounts can be reliably measured, then revenue should be recognized.

The multi-step income statement allows readers to easily identify gross profit and profits earned from operating activities.

Frenzo Furniture Co. is a manufacturer of specialty furniture. Because each piece is custom manufactured, the company requires a down payment of 40% of the estimated cost of the finished piece before production begins. Frenzo Furniture Co. should record the deposit as a

The choice of presenting expenses based on their nature or function rests with management.

At the time of sale, the selling price does not have to be determined in order for the selling company to quantify the economic benefits of the transactions.

In order to use the percentage of completion method, it is necessary to have continuing involvement or control over the goods/services.

In order to recognize revenue for interest, royalties, or dividends, all companies must be able to determine the costs incurred to complete the transaction.

Part of the revenue recognition criteria includes reasonable assurance of collectability of at least some portion of the amount earned.