Question 1

All of the following criteria must be satisfied in order to recognize revenue for the provision of services EXCEPT

Accepted Answer

A)  the portion of total services can be reliably measured. 
B)  the costs incurred can be reliably measured. 
C)  the seller has no continuing involvement. 
D)  the amount of revenue can be reliably measured.

Question 2

When buyers request and receive an adjustment for products damaged during shipping this is called a trade discount.

Accepted Answer

A) True 
 B)False

Question 3

Comprehensive income is equal to

Accepted Answer

A)  net income minus comprehensive income. 
B)  net income plus comprehensive income. 
C)  gross profit plus comprehensive income. 
D)  gross profit minus comprehensive income.

Question 4

The Carluccis decided to open a resort. In the first month of operation they collected cash and credit card receipts of $1,800. All rooms rent out at $75 a night and during the month they had 19 room rentals and had received non-refundable deposits of $37.50 each on another five nights of rentals. For two of those deposits the people had failed to show up and the Carluccis did not refund the deposits, the other three deposits were for future stays. The appropriate amount for them to recognize as revenue for their first month is

Accepted Answer

A)  $1,425. 
B)  $1,500. 
C)  $1,800. 
D)  $1,575.

Question 5

If a customer receives goods that are damaged but does not want to return the goods to the seller, the seller can offer a reduction in the selling price which is known as an allowance.

Accepted Answer

A) True 
 B)False

Question 6

Sales returns and allowances is a contra revenue account which is added to sales revenue when determining net sales.

Accepted Answer

A) True 
 B)False

Question 7

In the retail industry, when customers pay cash at the time of sale, revenue is recognized

Accepted Answer

A)  when the inventory is purchased. 
B)  at the time of sale. 
C)  when the time frame for returns has passed. 
D)  when the cash is deposited in the bank.

Question 8

Earnings are considered to be of lower quality if

Accepted Answer

A)  cash flow from operating activities is greater than net earnings. 
B)  cash flow from financing activities is less than net earnings. 
C)  cash flow from operating activities is less than net earnings. 
D)  cash flow from investing activities is less than net earnings.

Question 9

All of the following are examples of service revenues EXCEPT

Accepted Answer

A)  cell phone, internet, or television services. 
B)  cargo revenues when airlines provide flight services to their customers. 
C)  textbook sales by universities and colleges. 
D)  service and maintenance revenue by vehicle manufacturers.

Question 10

Private companies must report comprehensive income in their financial statements.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A)  sale of goods. 
B)  provision of services. 
C)  receipt of interest. 
D)  none of the above.

Question 12

A typical sales discount is "2/10, n/30" which means that the customer

Accepted Answer

A)  could take a 2% discount in 10 days. 
B)  could take a 10% discount in 2 days. 
C)  could take a 2% discount in 30 days. 
D)  will get no discount if paid in 10 days.

Question 13

Frozen Limited sold $1,750,000 worth of goods during the current year. The cost of goods sold is $1,050,000. Credit sales were $1,575,000, of which 40% were still outstanding. How much cash was collected by Frozen Ltd.?

Accepted Answer

A)  $1,575,000 
B)  $1,120,000 
C)  $ 805,000 
D)  $ 175,000

Question 14

Operating expenses included all of the following EXCEPT

Accepted Answer

A)  advertising. 
B)  depreciation. 
C)  rent. 
D)  loss on sale of equipment.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Examples of functional areas of the income statement are

Accepted Answer

A)  sales, gross profit, and net income. 
B)  cost of sales, administrative activities, and selling activities. 
C)  wages expenses, depreciation, and rent expense. 
D)  gross profit, operating income, and net income.

Question 18

Estimated returns must be reported in the same period as the related sales, which ensures that the company's net sales revenues are fairly stated.

Accepted Answer

A) True 
 B)False

Question 19

In order to apply the percentage of completion method the contractor must be able to estimate all the following EXCEPT

Accepted Answer

A)  the total cost of the project. 
B)  the total revenue for the project. 
C)  the collectability of all receivables. 
D)  the amount of revenue to be recognized each period.

Question 20

Certossi's Spa sells gift certificates for future services. These gift certificate sales should be recorded as

Accepted Answer

A)  a credit to sales revenue. 
B)  a credit to cash. 
C)  a debit to sales revenue. 
D)  a credit to unearned revenue.

Exam 4: Revenue Recognition and the Statement of Incom

All of the following criteria must be satisfied in order to recognize revenue for the provision of services EXCEPT

When buyers request and receive an adjustment for products damaged during shipping this is called a trade discount.

Comprehensive income is equal to

If a customer receives goods that are damaged but does not want to return the goods to the seller, the seller can offer a reduction in the selling price which is known as an allowance.

Sales returns and allowances is a contra revenue account which is added to sales revenue when determining net sales.

In the retail industry, when customers pay cash at the time of sale, revenue is recognized

Earnings are considered to be of lower quality if

All of the following are examples of service revenues EXCEPT

Private companies must report comprehensive income in their financial statements.

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

A typical sales discount is "2/10, n/30" which means that the customer

Frozen Limited sold $1,750,000 worth of goods during the current year. The cost of goods sold is $1,050,000. Credit sales were $1,575,000, of which 40% were still outstanding. How much cash was collected by Frozen Ltd.?

Operating expenses included all of the following EXCEPT

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

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

Examples of functional areas of the income statement are

Estimated returns must be reported in the same period as the related sales, which ensures that the company's net sales revenues are fairly stated.

In order to apply the percentage of completion method the contractor must be able to estimate all the following EXCEPT

Certossi's Spa sells gift certificates for future services. These gift certificate sales should be recorded as