Question 1

The most common critical event in the revenue generation sequence is:

Accepted Answer

A)  manufacture of the goods. 
B)  delivery to customer. 
C)  collection of cash. 
D)  receipt of the order. 
A)  manufacture of the goods. 
B)  delivery to customer. 
C)  collection of cash. 
D)  receipt of the order. B

Question 2

Opec Ltd manufactures crystal balls. Transactions for year ended 31 December 2016 were as follows:
 
What was the reported profit for the year 2016?

Accepted Answer

A)  $100 000 
B)  $140 000 
C)  $180 000 
D)  $350 000 
A)  $100 000 
B)  $140 000 
C)  $180 000 
D)  $350 000 B

Question 3

The percentage of completion profit for a particular project of Redgate Ltd was $200 000 for year 1 and $220 000 for year 2 (completion). What difference would there be to the total profit for the two years if the completion of production method were used?

Accepted Answer

A)  Profit would be $200 000 higher. 
B)  Profit would be $420 000 higher. 
C)  Profit would be $420 000 lower. 
D)  There would be no difference. 
A)  Profit would be $200 000 higher. 
B)  Profit would be $420 000 higher. 
C)  Profit would be $420 000 lower. 
D)  There would be no difference. D

Question 4

Leslie Ltd has found an error in its revenue account: an invoice for $3000 was recorded as revenue in 2015 when it should have been recorded in 2016. The company's income tax rate is 40 per cent and there was no corresponding error in cost of goods sold. Assuming that the dividend is unchanged, what is the effect of the error on retained profits at end of 2016?

Accepted Answer

A)  It is $1800 too low. 
B)  It is $3000 too low. 
C)  It is $1800 too high. 
D)  There is no effect. 
A)  It is $1800 too low. 
B)  It is $3000 too low. 
C)  It is $1800 too high. 
D)  There is no effect.

Question 5

Holidays Ltd manufactures caravans. Transactions for the year ended 30 June 2016 were as follows:
 
What was the reported profit for the year ended 30 June 2016 if revenue was recognised at the point of sale?

Accepted Answer

A)  $4 750 000 
B)  $5 000 000 
C)  $6 000 000 
D)  $2 000 000 
A)  $4 750 000 
B)  $5 000 000 
C)  $6 000 000 
D)  $2 000 000

Question 6

Highrise Constructions Ltd had a large three-year project with total revenue of $5 000 000 and estimated total costs of $4 200 000. The project was 25 per cent complete at the end of the first year, 55 per cent complete at the end of the second year and 100 per cent complete at the end of the third year. Revenues and costs were as estimated. How much profit was earned during the first year if the percentage of completion method was used?

Accepted Answer

A)  $200 000 
B)  $240 000 
C)  $250 000 
D)  $800 000 
A)  $200 000 
B)  $240 000 
C)  $250 000 
D)  $800 000

Question 7

Revenue should be recognised when:

Accepted Answer

A)  (i) and (ii) only 
B)  (i) and (iii) only 
C)  (ii) and (iii) only 
D)  (i), (ii) and (iii) 
A)  (i) and (ii) only 
B)  (i) and (iii) only 
C)  (ii) and (iii) only 
D)  (i), (ii) and (iii)

Question 8

Multi-Storey Builders Ltd had a large three-year project with total revenue of $8 000 000 and estimated total costs of $6 500 000. The project was 20 per cent complete at the end of the first year, 70 per cent complete at the end of the second year and 100 per cent complete at the end of the third year. Revenues and costs were as estimated. How much profit was earned during the first year if the percentage of completion method was used?

Accepted Answer

A)  $300 000 
B)  $750 000 
C)  $1 500 000 
D)  $1 600 000 
A)  $300 000 
B)  $750 000 
C)  $1 500 000 
D)  $1 600 000

Question 9

At what point would you expect revenue from sales of software by a computer store to be recognised?

Accepted Answer

A)  During production 
B)  On completion of production 
C)  At point of sale or delivery 
D)  When cash is received 
A)  During production 
B)  On completion of production 
C)  At point of sale or delivery 
D)  When cash is received

Question 10

Leslie Ltd has found an error in its revenue account: an invoice for $3000 was recorded as revenue in 2015 when it should have been recorded in 2016. The company's income tax rate is 40 per cent and there was no corresponding error in cost of goods sold. Assuming that the dividend is unchanged, what is the effect of the error on retained profits at end of 2015?

Accepted Answer

A)  It is $1200 too high. 
B)  It is $1800 too high. 
C)  It is $3000 too high. 
D)  There is no effect. 
A)  It is $1200 too high. 
B)  It is $1800 too high. 
C)  It is $3000 too high. 
D)  There is no effect.

Question 11

Under which of the following circumstances would revenue normally be recognised?

Accepted Answer

A)  A customer pays an overdue account. 
B)  A customer pays for goods in advance of production. 
C)  The business makes a cash purchase of merchandise. 
D)  The business makes a cash sale of merchandise. 
A)  A customer pays an overdue account. 
B)  A customer pays for goods in advance of production. 
C)  The business makes a cash purchase of merchandise. 
D)  The business makes a cash sale of merchandise.

Question 12

Leslie Ltd has found an error in its revenue account: an invoice for $3000 was recorded as revenue in 2015 when it should have been recorded in 2016. The company's income tax rate is 40 per cent and there was no corresponding error in cost of goods sold. What is the effect of the error on 2015 cash from operations?

Accepted Answer

A)  There is no cash effect. 
B)  It is $1200 too high. 
C)  It is $1800 too high. 
D)  It is $3000 too high. 
A)  There is no cash effect. 
B)  It is $1200 too high. 
C)  It is $1800 too high. 
D)  It is $3000 too high.

Question 13

On 1 January 2015, Romulus Ltd signed a contract worth $21 000 000 to construct a light rail from A to B. The light rail was to be built over three years, with progress payments of $7 000 000 to be made at the end of each year. Estimated costs were $15 000 000 and the following costs incurred and paid by Romulus Ltd were in accordance with estimates and represented the percentage completed in each year:
 
The project was completed in December 2017. Using the percentage of completion method, what profit would Romulus Ltd report in 2017?

Accepted Answer

A)  $7 000 000 
B)  $6 000 000 
C)  $800 000 
D)  $280 000 
A)  $7 000 000 
B)  $6 000 000 
C)  $800 000 
D)  $280 000

Question 14

The profit for a particular project of Blue Fin Ltd, using the percentage of completion method, was $470 000 for year 1 and $690 000 for year 2 (completion). What difference would there be to profit for year 2 if the completion of production method were used?

Accepted Answer

A)  Profit would be $1 160 000 higher. 
B)  Profit would be $690 000 higher. 
C)  Profit would be $470 000 lower. 
D)  Profit would be $470 000 higher. 
A)  Profit would be $1 160 000 higher. 
B)  Profit would be $690 000 higher. 
C)  Profit would be $470 000 lower. 
D)  Profit would be $470 000 higher.

Question 15

Toy Company manufactures toy koalas. Transactions for the year 2016 were as follows:
 
What was the reported profit for the year 2016 if revenue was recognised at the point of sale?

Accepted Answer

A)  $140 000 
B)  $240 000 
C)  $320 000 
D)  $350 000 
A)  $140 000 
B)  $240 000 
C)  $320 000 
D)  $350 000

Question 16

Which of the following statements about the critical event in the revenue-generation sequence is true?

Accepted Answer

A)  The most common critical event used is the receipt of cash from the customer. 
B)  The critical event is the point that can be readily documented and at which all revenue is recognised. 
C)  There can never be several critical events in a firm's operating cycle. 
D)  Revenue can be recognised even though no action relating to the contract has been completed. 
A)  The most common critical event used is the receipt of cash from the customer. 
B)  The critical event is the point that can be readily documented and at which all revenue is recognised. 
C)  There can never be several critical events in a firm's operating cycle. 
D)  Revenue can be recognised even though no action relating to the contract has been completed.

Question 17

With respect to services provided, it is customary to recognise revenue when the:

Accepted Answer

A)  customer requests the service. 
B)  supplier agrees to provide the service. 
C)  service is provided. 
D)  service is paid for. 
A)  customer requests the service. 
B)  supplier agrees to provide the service. 
C)  service is provided. 
D)  service is paid for.

Question 18

At what point would you expect revenue from sales of building materials to be recognised?

Accepted Answer

A)  During production 
B)  On completion of production 
C)  At point of sale or delivery 
D)  When cash is received 
A)  During production 
B)  On completion of production 
C)  At point of sale or delivery 
D)  When cash is received

Question 19

On 1 January 2015, Romulus Ltd signed a contract worth $21 000 000 to construct a light rail from A to B. The light rail was to be built over three years, with progress payments of $7 000 000 to be made at the end of each year. Estimated costs were $15 000 000 and the following costs incurred and paid by Romulus Ltd were in accordance with estimates and represented the percentage completed in each year:
 
The project was completed in December 2017. Using the completed contract method, how much profit would Romulus Ltd report in 2017?

Accepted Answer

A)  $0 
B)  $800 000 
C)  $5 000 000 
D)  $6 000 000 
A)  $0 
B)  $800 000 
C)  $5 000 000 
D)  $6 000 000

Question 20

The profit for a particular project of Blue Fin Ltd, using the percentage of completion method, was $470 000 for year 1 and $690 000 for year 2 (completion). What difference would there be to the total profit for two years if the completion of production method were used?

Accepted Answer

A)  Profit would be $1 160 000 higher. 
B)  Profit would be $690 000 higher. 
C)  Profit would be $470 000 higher. 
D)  There would be no difference. 
A)  Profit would be $1 160 000 higher. 
B)  Profit would be $690 000 higher. 
C)  Profit would be $470 000 higher. 
D)  There would be no difference.

The most common critical event in the revenue generation sequence is:

Opec Ltd manufactures crystal balls. Transactions for year ended 31 December 2016 were as follows: What was the reported profit for the year 2016?

The percentage of completion profit for a particular project of Redgate Ltd was $200 000 for year 1 and $220 000 for year 2 (completion). What difference would there be to the total profit for the two years if the completion of production method were used?

Holidays Ltd manufactures caravans. Transactions for the year ended 30 June 2016 were as follows: What was the reported profit for the year ended 30 June 2016 if revenue was recognised at the point of sale?

Revenue should be recognised when:

At what point would you expect revenue from sales of software by a computer store to be recognised?

Under which of the following circumstances would revenue normally be recognised?

The profit for a particular project of Blue Fin Ltd, using the percentage of completion method, was $470 000 for year 1 and $690 000 for year 2 (completion). What difference would there be to profit for year 2 if the completion of production method were used?

Toy Company manufactures toy koalas. Transactions for the year 2016 were as follows: What was the reported profit for the year 2016 if revenue was recognised at the point of sale?

Which of the following statements about the critical event in the revenue-generation sequence is true?

With respect to services provided, it is customary to recognise revenue when the:

At what point would you expect revenue from sales of building materials to be recognised?

The profit for a particular project of Blue Fin Ltd, using the percentage of completion method, was $470 000 for year 1 and $690 000 for year 2 (completion). What difference would there be to the total profit for two years if the completion of production method were used?

Introduction to Financial Accounting

Measuring and Evaluating Financial Position and Financial Performance

The Double-Entry System

Record-Keeping

Accrual Accounting Adjustments

Financial Reporting Principles, Accounting Standards and Auditing

Internal Control and Cash

Accounts Receivable and Further Record-Keeping

Inventory

Noncurrent Assets

Liabilities

Completing the Balance Sheet

The Statement of Cash Flows

Financial Statement Analysis

Accounting Policy Choices

Sustainability Reporting

Filters

Exam 13: Revenue and Expense Recognition: Additional Concepts

The most common critical event in the revenue generation sequence is:

Opec Ltd manufactures crystal balls. Transactions for year ended 31 December 2016 were as follows: What was the reported profit for the year 2016?

The percentage of completion profit for a particular project of Redgate Ltd was $200 000 for year 1 and $220 000 for year 2 (completion). What difference would there be to the total profit for the two years if the completion of production method were used?

Holidays Ltd manufactures caravans. Transactions for the year ended 30 June 2016 were as follows: What was the reported profit for the year ended 30 June 2016 if revenue was recognised at the point of sale?

Revenue should be recognised when:

At what point would you expect revenue from sales of software by a computer store to be recognised?

Under which of the following circumstances would revenue normally be recognised?

The profit for a particular project of Blue Fin Ltd, using the percentage of completion method, was $470 000 for year 1 and $690 000 for year 2 (completion). What difference would there be to profit for year 2 if the completion of production method were used?

Toy Company manufactures toy koalas. Transactions for the year 2016 were as follows: What was the reported profit for the year 2016 if revenue was recognised at the point of sale?

Which of the following statements about the critical event in the revenue-generation sequence is true?

With respect to services provided, it is customary to recognise revenue when the:

At what point would you expect revenue from sales of building materials to be recognised?

The profit for a particular project of Blue Fin Ltd, using the percentage of completion method, was $470 000 for year 1 and $690 000 for year 2 (completion). What difference would there be to the total profit for two years if the completion of production method were used?

Introduction to Financial Accounting

Measuring and Evaluating Financial Position and Financial Performance

The Double-Entry System

Record-Keeping

Accrual Accounting Adjustments

Financial Reporting Principles, Accounting Standards and Auditing

Internal Control and Cash

Accounts Receivable and Further Record-Keeping

Inventory

Noncurrent Assets

Liabilities

Completing the Balance Sheet

The Statement of Cash Flows

Financial Statement Analysis

Accounting Policy Choices

Sustainability Reporting

Filters