Question 1

Which one of the following statements is false?

Accepted Answer

A)  The use of the installment method of recognizing revenue is generally unacceptable. 
B)  When the installment method of recognizing revenue is in use, operating expenses are not deferred and recognized in the future. 
C)  Deferred gross profit should be disclosed as a current liability on the balance sheet. 
D)  A company may use the installment method of revenue recognition for a sales transaction that is not an installment sale. 
A)  The use of the installment method of recognizing revenue is generally unacceptable. 
B)  When the installment method of recognizing revenue is in use, operating expenses are not deferred and recognized in the future. 
C)  Deferred gross profit should be disclosed as a current liability on the balance sheet. 
D)  A company may use the installment method of revenue recognition for a sales transaction that is not an installment sale.

Question 2

Which method of revenue recognition do IFRS require for construction contracts when the percentage-of-completion method cannot be applied?

Accepted Answer

A)  completed contract 
B)  installment sales 
C)  completed contract. 
D)  cost recovery 
A)  completed contract 
B)  installment sales 
C)  completed contract. 
D)  cost recovery

Question 3

When a sufficient transfer of the risks and benefits of ownership does not exist in a sales transaction, the preferred revenue recognition method is the

Accepted Answer

A)  proportional performance method 
B)  installment method 
C)  percentage of completion 
D)  deferral method 
A)  proportional performance method 
B)  installment method 
C)  percentage of completion 
D)  deferral method

Question 4

The installment method is usually associated with

Accepted Answer

A)  revenue recognition in the period of sale 
B)  revenue recognition prior to the period of sale 
C)  revenue recognition after the period of sale 
D)  revenue recognition delayed until a future event occurs 
A)  revenue recognition in the period of sale 
B)  revenue recognition prior to the period of sale 
C)  revenue recognition after the period of sale 
D)  revenue recognition delayed until a future event occurs

Question 5

In 2015, Hart Company purchased land for $75,000 for future expansion. The market collapsed causing Hart to sell the land for $100,000 on credit. Due to the issues associated with current market conditions Hart used the cost recovery method for the sale. The cash collections were $25,000, $45,000, and $30,000, respectively.
Required:
Prepare the journal entries for each year.

Accepted Answer

The answer of In 2015, Hart Company purchased land for...

Question 6

Revenue recognition prior to period of sale is used to reflect

Accepted Answer

A)  reliability of the financial information 
B)  economic substance instead of legal form 
C)  the inability of a producer to determine acquisition cost 
D)  the recognition of propositional performance 
A)  reliability of the financial information 
B)  economic substance instead of legal form 
C)  the inability of a producer to determine acquisition cost 
D)  the recognition of propositional performance

Question 7

Denton Products Co., a consignee, received inventory items on consignment. The cost of these goods was $2,000. Denton paid reimbursable advertising costs of $250. The goods were sold for $5,700, and Denton earned a 20% commission on the sales price. Denton paid the consignor the amount due.
Required:
Prepare journal entries to record the information above.

Accepted Answer

The answer of Denton Products Co., a consignee, received inventory...

Question 8

When there is a very high degree of uncertainty about the collectibility of the sales price in a sale, the preferred method of revenue recognition is the

Accepted Answer

A)  cost recovery method 
B)  installment method 
C)  deferral method 
D)  proportional performance method 
A)  cost recovery method 
B)  installment method 
C)  deferral method 
D)  proportional performance method

Question 9

When a company uses the percentage-of-completion method for revenue recognition, the most difficult approach to determine the percentage completed is using

Accepted Answer

A)  output measures 
B)  cost-to-cost method 
C)  efforts-expended method 
D)  input measures 
A)  output measures 
B)  cost-to-cost method 
C)  efforts-expended method 
D)  input measures

Question 10

Which one of the following types of cost is not a typical service cost involved with long-term service contracts?

Accepted Answer

A)  initial direct costs 
B)  direct costs 
C)  initial indirect costs 
D)  indirect costs 
A)  initial direct costs 
B)  direct costs 
C)  initial indirect costs 
D)  indirect costs

Question 11

The Orlando Company is involved in a three-year long-term contract. The following data relate to this contract:   
Required:
Prepare the journal entries to reflect the percentage-of-completion method for each of the following:
2015 Entries   2016 Entries

Accepted Answer

The answer of The Orlando Company is involved in a...

Question 12

When a down payment is received, the deposit from purchaser account used under the deferral method is reported on the balance sheet of the seller as a(n)

Accepted Answer

A)  revenue 
B)  liability 
C)  asset 
D)  contra asset 
A)  revenue 
B)  liability 
C)  asset 
D)  contra asset

Question 13

The deferred gross profit on installment sales is reported on the balance sheet as a

Accepted Answer

A)  current asset 
B)  current liability 
C)  contra-asset 
D)  long-term liability 
A)  current asset 
B)  current liability 
C)  contra-asset 
D)  long-term liability

Which one of the following statements is false?

Which method of revenue recognition do IFRS require for construction contracts when the percentage-of-completion method cannot be applied?

When a sufficient transfer of the risks and benefits of ownership does not exist in a sales transaction, the preferred revenue recognition method is the

The installment method is usually associated with

Revenue recognition prior to period of sale is used to reflect

When there is a very high degree of uncertainty about the collectibility of the sales price in a sale, the preferred method of revenue recognition is the

When a company uses the percentage-of-completion method for revenue recognition, the most difficult approach to determine the percentage completed is using

Which one of the following types of cost is not a typical service cost involved with long-term service contracts?

The Orlando Company is involved in a three-year long-term contract. The following data relate to this contract: Required: Prepare the journal entries to reflect the percentage-of-completion method for each of the following: 2015 Entries 2016 Entries

When a down payment is received, the deposit from purchaser account used under the deferral method is reported on the balance sheet of the seller as a(n)

The deferred gross profit on installment sales is reported on the balance sheet as a

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingencies

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Accounting for Income Taxes

Accounting for Postretirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

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Exam 17: Advanced Issues in Revenue Recognition

Which one of the following statements is false?

Which method of revenue recognition do IFRS require for construction contracts when the percentage-of-completion method cannot be applied?

When a sufficient transfer of the risks and benefits of ownership does not exist in a sales transaction, the preferred revenue recognition method is the

The installment method is usually associated with

Revenue recognition prior to period of sale is used to reflect

When there is a very high degree of uncertainty about the collectibility of the sales price in a sale, the preferred method of revenue recognition is the

When a company uses the percentage-of-completion method for revenue recognition, the most difficult approach to determine the percentage completed is using

Which one of the following types of cost is not a typical service cost involved with long-term service contracts?

The Orlando Company is involved in a three-year long-term contract. The following data relate to this contract: Required: Prepare the journal entries to reflect the percentage-of-completion method for each of the following: 2015 Entries 2016 Entries

When a down payment is received, the deposit from purchaser account used under the deferral method is reported on the balance sheet of the seller as a(n)

The deferred gross profit on installment sales is reported on the balance sheet as a

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingencies

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Accounting for Income Taxes

Accounting for Postretirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

Filters