Accounting II Chapter 18 – Flashcards

The first step in the process for revenue recognition is to a) allocate transaction price to the separate performance obligations. b) identify the contract with customers. c) identify the separate performance obligations in the contract. d) determine the transaction price.

The second step in the process for revenue recognition is to a) determine the transaction price. b) identify the contract with customers. c) identify the separate performance obligations in the contract. d) allocate transaction price to the separate performance obligations.

The third step in the process for revenue recognition is to a) allocate transaction price to the separate performance obligations. b) identify the separate performance obligations in the contract. c) recognize revenue when each performance obligation is satisfied. d) determine the transaction price.

The fourth step in the process for revenue recognition is to a) recognize revenue when each performance obligation is satisfied. b) identify the separate performance obligations in the contract. c) determine the transaction price. d) allocate transaction price to the separate performance obligations.

The last step in the process for revenue recognition is to a) determine the transaction price. b) identify the contract with customers. c) allocate transaction price to the separate performance obligations. d) recognize revenue when each performance obligation is satisfied.

A contract between Boeing and Delta in which Boeing supplies planes to Delta a) is an agreement that creates enforceable rights and obligations for Boeing only. b) is considered wholly unperformed until Boeing receives payment from Delta. c) cannot create multiple performance obligations. d) is an agreement that creates enforceable rights and obligations for both parties.

On January 15, 2018, Bella Vista Company enters into a contract to build custom equipment for ABC Carpet Company. The contract specified a delivery date of March 1. The equipment was not delivered until March 31. The contract required full payment of $75,000 30 days after delivery. The revenue for this contract should be a) recorded on January 15, 2018. b) recorded on March 1, 2018. c) recorded on March 31, 2018. d) recorded on April 30, 2018.

A company must account for a contract modification as a new contract if the a) goods or services are distinct and company has right to receive the standalone price. b) goods or services are interdependent on each other. c) promised goods or services are distinct. d) company has the right to receive consideration equal to standalone price.

When a contract modification does not result in a separate performance obligation, the additional products are priced at the a) standalone price of the product. b) blended price of original contract and contract modification. c) selling price specified in contract modification. d) average selling price of original selling price and standalone price.

When multiple performance obligations exist in a contract, they should be accounted for as a single performance obligation when a) both performance obligations are distinct but interdependent. b) each service is interdependent and interrelated. c) the product is distinct within the contract. d) determination cannot be made.

The transaction price a) excludes time value of money if the contract involves a significant financing component. b) does not consider noncash consideration such as donations, gifts, equipment or labor. c) excludes discounts, volume rebates, coupons and free products, or services. d) is the amount of consideration that a company expects to receive from a customer.

If a contract involves a significant financing component, a) interest must be accrued on the current sales price of goods or services. b) the time value of money is used to determine the fair value of the transaction. c) the time value of money is not required to determine transaction price, if the payment is scheduled to occur in more than a year. d) the transaction amount should be based on the current sales price of goods or services.

Noncash consideration should be a) recognized on the basis of fair value of what is given up. b) recognized on the basis of fair value of equivalent goods or services. c) recognized on the basis of original cost paid by customer. d) recognized on the basis of fair value of what is received.

A transaction price for multiple performance obligations should be allocated a) based on total transaction price less residual value. b) based on what the company could sell the goods for on a standalone basis. c) based on selling price from the company's competitors. d) based on forecasted cost of satisfying performance obligation.

The cost-to-cost basis measures progress towards completion by a) tracking floors of a building completed versus floors still to be completed. b) comparing costs incurred to date with total costs to complete the contract. c) tracking miles of a highway completed versus miles of highway still to be completed. d) tracking results of work completed to date; it is an output measure.

Consignments are a specialized marketing method whereby the a) consignee pays for good up front and is paid when merchandise is sold. b) consignee purchases goods for sale and sends payment when goods are sold. c) consignee (agent) holds title to the product. d) consignee takes possession of merchandise but title remains with manufacturer.

Partial satisfaction of a multiple performance obligation is reported on the balance sheet as a) unearned service revenue. b) contract asset. c) receivable. d) contract liability.

A contract liability is a company's obligations to transfer goods or services to a customer for which the company has received consideration from the customer. An example of a contract liability is a) Unearned magazine subscription. b) Service Revenue. c) Mortgage Payable. d) Prepaid subscription.