Exam 4: Revenue Recognition and the Statement of Income

Under the contract base approach, when management estimates the extent of expected returns as a form of variable consideration, the company must establish a(n):

Under the contract-based approach, revenue is recognized when:

A single-step income statement requires several steps to reach a company's net profit or loss.

Earnings are considered to be of higher quality if

Rainbow 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 Rainbow Designers recognize revenue for this job assuming the job is performed on one accounting period?

Comprehensive income must be reported on a separate statement called the Statement of Comprehensive Income or on the statement of income, immediately below next income.

Bailey Consulting, a Winnipeg based company that uses the contract-based approach to revenue recognition, has just signed a contract to complete a strategic plan for a local business. The five-step model Bailey Consulting should follow to recognize revenue should include all of the following, except for

Melanie purchases an new Honda Civic. During the negotiations the sales representative gives her the opportunity to purchase a 10-year bumper to bumper warranty. This is referred to as a(n):

The Carluccis decided to open a resort. In the first month of operation they collected cash and credit card receipts of $1,612.50. All rooms rent out at $75 a night and during the month they had 19 room rentals. In addition to the 19 rentals, they received non-refundable deposits of $37.50 each on another five nights of rentals. Two of those deposits related to the current month and the people failed to show up. The Carluccis did not refund the deposits for these two customers. The remaining three deposits are for future stays. The appropriate amount for them to recognize as revenue for their first month is

The difference between sales revenue and cost of goods sold is

Under the contract-based approach, revenue is recognized whenever a company's net position in a contract decreases.

Factors that are indicative of a service warranty include all of the following except for

The difference between gross profit and the company's operating expenses is

A service warranty is considered to be a separate performance obligation under the contract-based approach for revenue recognition.

Under ASPE, when revenue is earned from the sale of goods under the earnings based approach, all of the following criteria must be met before revenue can be recognized except

There must be a receipt of cash in order for a company to recognize revenue.

On March 15, Luxurious Landscapers enters into a contract with Direct Insurance Brokers to provide landscaping services for the spring and summer season. The contract is to begin on May 1 and terminate on October 31. Luxurious will provide weekly landscaping services during this period. The entire value of the contract is $7,200 for 6 months, to be paid monthly on the first day of each month. Luxurious Landscapers uses the contract-based approach for revenue recognition. Instructions a) Determine if there is a contract between Luxurious Landscapers and Direct Insurance Brokers. b) If there is a contract, record Luxurious' entries related to these transactions for the month of May.

Tuition services when universities and colleges provide educational services are considered revenue from

Basically Beautiful Wholesaler sells beauty products to salons and spas. The company's sales for the period ended December 31, 2020 were $1,175,000. The cost of sales are estimated at 60% of revenues, with an estimated return rate of 5%. Returned product is expected to be scrapped. All sales are made on account. Instructions a) Prepare Basically Beautiful's partial Statement of Income. b) Record Basically Beautiful's sales for the period.

Identify and describe the differences between an assurance warranty and service warranty. What are the characteristics of a service warranty?