Deck 15: Revenue

Question 1

Which of the following is not part of the five-step model for determining the recognition of revenue from contracts with customers:

A) Determine the transaction price
B) Identify the contract with the customer
C) Recognise revenue when a performance obligation is satisfied
D) Identify the schedule of payments in the contract

Answer 1

D

Question 2

Which of the following are considered 'distinct' goods or services according to AASB 15?

A) Granting licenses
B) Constructing an asset on behalf of a customer
C) Sale of goods produced by an entity
D) All of the above are considered distinct

Answer 2

D

Question 3

Which type of contract with customers is exempt from Paragraph 5 of AASB 15 'Revenue from Contracts with Customers'?

A) Lease contracts covered by AASB 117 'Leases'
B) Installment sales
C) Both A and B
D) Neither A nor B

Answer 3

A

Question 4

What is a factor that might influence the transaction price?

A) Non-cash consideration
B) Currency of the customer
C) Oral agreements
D) Consideration payable to a third party

Question 5

What term describes the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer,excluding amounts collected on behalf of third parties?

A) Settlement price
B) Contract price
C) Fair value
D) Transaction price

Question 6

How is the transaction price to be measured by the entity when receiving non-cash consideration from a customer?

A) Fair value of the goods and/or services transferred to the customer
B) Present value of future cash flows
C) Fair value of the non-cash consideration received from the customer
D) Book value of the non-cash consideration received from the customer

Question 7

Discuss the three types of repurchase agreements.

Question 8

Which of the following is required when identifying a contract?

A) The contract is notarised by a lawyer
B) The contract has commercial substance
C) Both A and B are required
D) Neither A nor B is required

Question 9

What are the promises about the goods and/or services that are to be provided by the entity to the customer commonly referred to as?

A) Contract modifications
B) Performance obligations
C) Articles of the contract
D) Warranties

Question 10

What are two determinants of commercial substance in a contract?

A) Payment terms and approval of the contract
B) The identification of each party's rights and payment terms
C) Risk and the timing of the entity's future cash flows
D) Approval of the contract and risk

Question 11

Discuss how an entity accounts for the receipt of non-cash consideration in a sales contract.

Question 12

What term describes activities that are undertaken by an entity as part of its business or to meet its objectives and related activities in which the entity engages in furtherance of,incidental to,or arising from activities undertaken to meet its objectives' ?

A) Revenue
B) Income
C) Ordinary Activities
D) Equity-producing

Question 13

What is a characteristic of the income statement approach to revenue recognition?

A) Changes in asset balances
B) Movements in liabilities
C) Dependence on the cash-basis of accounting
D) Based on the concept of income realization

Question 14

What must occur for a contract modification to exist?

A) The modification must be written
B) The modification requires a new contract
C) It must be initiated by the seller
D) All parties approve the modification

Question 15

What is a possible indicator of revenue reversal?

A) The contract has a broad range of possible consideration amounts
B) The entity's experiences with similar types of contracts is limited
C) Both A and B are possible indicators
D) Neither A nor B is a possible indicator

Question 16

What factors are considered when evaluating the collectability of an amount of consideration?

A) Ability and intention
B) Payment terms and ability
C) Intention and financial statement analysis
D) Rights and obligations

Question 17

Describe the nine steps of the earnings cycle,and give examples of how different contracts recognise revenue within the cycle.

Question 18

Which of the following criteria would facilitate the combining of contracts in accordance with AASB 15 'Revenue from Contracts with Customers'?

A) The contracts are negotiated as a package with a single commercial objective.
B) The amount of consideration to be paid in one contract depends on the price or performance of the other contract.
C) Either A or B is acceptable
D) Both A and B are required

Question 19

Which point of the earnings cycle is revenue recognised in most cases?

A) Receipt of cash
B) Delivery of goods to customers
C) Progressively throughout production
D) Receipt of orders after completing production

Question 20

Which two issues have been the most controversial in regards to revenue?

A) Timing and nature
B) Nature and recognition
C) Recognition and presentation
D) Disclosure and timing

Question 21

Which type of costs to fulfil a contract are excluded from being classified as assets?

A) Direct materials
B) General and administrative costs
C) Direct labour
D) Costs that relate directly to a contract

Question 22

What is true of an impairment reversal?

A) It must exceed the original carrying amount net of amortisation
B) The reversal occurs through profit or loss if the conditions that caused the impairment improve
C) They are disallowed by Australian accounting standards
D) The reversal must have been based on straight-line amortisation

Question 23

Distinguish the differences between a contract asset and a contract liability.

Question 24

Which of the following is true in regards to measuring progress towards the complete satisfaction of performance obligations?

A) Multiple methods of measuring progress can be used for a performance obligation
B) Methods based on inputs recognise revenue based on measures of the value of goods or services transferred to the customer
C) Only a single method of measuring progress can be used for a performance obligation
D) All of the above are true

Question 25

What is a cost that can be incurred with regard to the generation of revenue from contracts with customers?

A) Incremental costs of obtaining a contract
B) Costs incurred to fulfil a contract
C) Both A and B are correct
D) Neither A nor B is correct

Question 26

Which of the following is not addressed by Paragraph 110 of AASB 15 in regards to disclosures?

A) Any liabilities that have been recognised as a result of the contract
B) The entity's contracts with customers
C) The significant judgements and changes to judgements that the entity has made in applying AASB 15 to its contracts with customers
D) Any assets that have been recognised as a result of incurring costs to obtain or fulfil a contract with a customer

Question 27

What is a type of cost that can be incurred with regard to the generation of revenue from contracts with customers?

A) Incremental costs of obtaining a contract
B) Costs incurred to fulfil a contract
C) Both A and B can be incurred
D) Neither A nor B is incurred

Question 28

How must products be accounted for when they are transferred with a right of return?

A) As a refund liability
B) As an asset
C) Both A and B are requirements
D) Either A or B are acceptable

Question 29

Which of the following method(s)could estimate a stand-alone price?

A) An approach based on observable prices for similar goods or services
B) An expected cost plus margin approach
C) A residual approach
D) All of the listed methods could estimate a stand-alone price

Question 30

What arises when an entity performs under the contract by transferring goods or services to the customer before the consideration has been paid or is due?

A) Contract asset
B) Contract liability
C) Contract modification
D) Performance measure

Question 31

Which type of costs are incurred by an entity regardless of whether the entity wins a revenue contract bid?

A) Sales commissions
B) Franchise fees
C) Consignment fees
D) Marketing costs

Question 32

A vehicle and plot of land were purchased for $115 000. The fair value of the vehicle was $20 000,and the fair value of the land was $130 000 at the time of purchase. To the nearest dollar,what amount should be allocated to the vehicle?

A) $20 000
B) $57 500
C) $46 000
D) $15 333