acc ch 6 sb

Which of the following costs must be excluded from the calculation of the cost-to-cost ratio? (2): -Variable overhead costs -Inefficiencies related to the project -Costs that don't reflect progress toward completion

Inefficiencies related to the project; Costs that don't reflect progress toward completion

The transaction price is the amount the seller expects to ____________ from the customer in exchange for providing goods and services.

be entitled to receive

When the time value of money is significant, the transaction price is allocated

between the merchandise and the financing component

For the purpose of allocating the transaction price to multiple performance obligations, if a stand-alone selling price cannot be directly observed, the seller should

estimate it

Good Buy Electronics Inc. encourages its customers to purchase a separate warranty that protects products for up to five years. This warranty represents a(n)

extended warranty

A warranty that is normally sold separate and covers either a longer period of time and or additional risks is a(n)

extended warranty.

In a franchise agreement, the ___________ owns the company and gives an individual the right to use its name and sell its products.

franchisor

In a franchise agreement, the ___________ pays franchise fees to obtain the right to use a company's name and sell its products.

franchisor

Licenses typically allow customers to use the seller's _________ property.

intellectual

If a seller determines that the time value of money is significant, the seller adjusts sales or service revenue and recognizes the financing component as:

interest revenue

Agreements that allow customers to use the seller's intellectual property are referred to as ___________

licenses

Estimates relating to long-term contracts ( -remain unchanged until any related uncertainty is resolved. -must be periodically updated. -may be revised only if a overall loss is indicated. -are determined only at the beginning of the contract period.

must be periodically updated.

Which of the following agreements may qualify as contracts? (3): -voidable agreements -oral agreements -implicit agreements -written documents

oral agreements; implicit agreements; written documents

Methods that can be used to estimate progress toward completion are referred to as ____________--based and __________-based methods

output; input

Revenue recognition for services such as lending money and performing financial statement audits is typically

over time

Revenue is recognized when the ____________ obligation is satisfied.

performance

An essential characteristic of a contract is that all parties to the contract are committed to

performing their obligations and enforcing their rights

The cost-to-cost ratio is the most common approach used to estimate

progress toward completion

Being separately identifiable in the contract requires that the goods or services are

provided individually from other goods or services

The stand-alone price of a good or service may be estimated using the adjusted market assessment approach, the expected cost plus margin approach, or the __________ approach

residual

The amount at which a good or service is sold separately under similar circumstances is referred to as the

stand-alone selling price.

The amount the seller expects to be entitled to receive from the customer in exchange for providing goods or services is referred to as the

transaction price.

The core revenue recognition principle stipulates that companies recognize revenue when goods or services are

transferred to customers

True or false: Most long-term contracts should be viewed as single performance obligations.

true

True or false: Updated estimates related to contracts for which revenue was recognized during prior periods may necessitate recognition of losses.

true

Options for additional goods or services are considered performance obligations if they provide a material right to the customer that the customer

would not receive otherwise

agent (2):

Acts as a facilitator for helping seller transact with buyers; Earns a commission for helping seller transact with buyer

Which of the following likely would be treated as a separate performance obligation related to the purchase of a pair of prescription eye glasses? (1): -A micro-fiber cleaning cloth that is included with the glasses. -An unlimited time coupon for 50% off an additional pair of eye glasses -A eye glass case needed to protect the lenses

An unlimited time coupon for 50% off an additional pair of eye glasses

Which of the following likely will lead to revenue recognition at a point in time? (2): -Seller has possession of the asset -Seller has legal title to the asset -Buyer has accepted the asset -Buyer has legal title to the asset

Buyer has accepted the asset; Buyer has legal title to the asset

The concept or principle that states that companies should recognize revenue when goods or services are transferred to customers for the amount the company expects to be entitled to receive in exchange for goods and services is referred to as the:

Core revenue recognition principle

Which of the following is most commonly used to estimate progress toward completion of a long-term contract? (1): -Cost-to-cost ratio -Billings-to-total revenue ratio -Percentage of production method

Cost-to-cost ratio

Which of the following are key indicators that control of goods or services has been transferred to the customer? (3): -Customer accepted asset -Customer has legal title to the asset -Customer has physical possession of the asset -Customer signed a legally binding contract

Customer accepted asset; Customer has legal title to the asset; Customer has physical possession of the asset

Which of the following are key indicators that control of goods or services has been transferred to the customer? (3): -Customer has legal title to the asset -Customer has an obligation to pay -Customer accepted the risks and rewards of ownership -Customer signed a legally enforceable contract

Customer has legal title to the asset; Customer has an obligation to pay; Customer accepted the risks and rewards of ownership

Which of the following services are commonly performed over time? (3): -Financial statement audits -Vehicle repair -Consulting engagements -Lending of money

Financial statement audits; Consulting engagements; Lending of money

Which of the following conditions must be met for goods or services to be distinct? (2): -Goods or services are separately identified from other goods or services -Goods or services are highly interrelated -Goods or services are capable of being distinct

Goods or services are separately identified from other goods or services; Goods or services are capable of being distinct

principal (2):

Has primary responsibility for delivering goods or services; Carries risks and rewards associated with collecting the contract price

What method(s) can be used to estimate progress toward completion for the purpose of recognizing revenue over time? (2): -Variable cost method -Input method -Activity based method -Output method

Input method; Output method

third party (1):

Is not directly involved in a transaction.

Munch Inc. delivers various types of construction materials to a customer's building site. Over an 18-month period, Munch's employees utilize Munch's machinery and tools to construct a new office building for the customer. Munch identifies only one performance obligation related to this contract because

Munch combines the materials, labor, and use of machinery and tools to construct a single complete building.

Which methods may be used to estimate the stand-alone prices of goods and services? (3): -Current replacement cost approach -Residual approach -Adjusted market assessment approach -Expected cost plus margin approach

Residual approach; Adjusted market assessment approach; Expected cost plus margin approach

Which of the following differs between revenue recognized over time and revenue recognized at completion? (1): -Total expense -Total revenue -The timing of recognition -Total profit

The timing of recognition

Which of the following will not differ between revenue recognized over time and revenue recognized at completion? (3): -Total profit -Total revenue -The timing of recognition -Total expense

Total profit; Total revenue; Total expense

Long-term contracts require careful consideration in identifying performance obligations because these type of contracts typically include many products and services that

could be viewed as separate performance obligations.

A good or service is capable of being distinct only if the customer

could use the good or service on its own or in combination with goods or services acquired elsewhere

The inflow of cash or other assets that a business receives when it provides goods or services to customers is referred to as

revenues

What account tracks the inflow of net assets that occurs when a business provides goods or services to its customers?

revenues

The ____________-___________ selling price is the amount at which the good or service is sold separately under similar circumstance.

stand alone

Arthur Inc. provides services to consulting clients. Arthur should recognize the related revenue when

the related performance obligation is satisfied.