ACC Ch. # 18

the measure of the fair value of a performance obligation is the

stand-alone selling price

Revenue is recognized when

the performance obligation is satisfied

In a consignment sale, the consignee

recognizes a payable when the consignment is sold

Companies recognize revenue over a period of time if

(1) the customer controls the asset as it is created or the company has no other use for the asset and (2) the company has a right to payment

For the customer to have obtained control of a product in a bill-and-hold arrangement, all of the following criteria should be met

(1) the reason for the bill and hold must be substantive, (2) the product must be identified separately as belonging to the customer, (3) the product must currently be ready for physical transfer to the customer and (4) the seller must not have the ability to use the product or direct it at another customer

When using the percentage of completion method, the company accumulates

construction costs plus gross profit earned to date in an inventory account

A contract is an agreement between two parties that creates enforceable rights or obligations.

True

Most revenue transactions pose few problems for revenue recognition because often the transaction is initiated and completed at the same time.

True

A nonrefundable upfront fee is generally recorded

as revenue over the periods benefitted

The new standard, Revenue from Contracts with Customers adopts an..

asset liability approach for recognizing revenue

For an unprofitable contract, the entire expected loss is recognized in the current period when using

both percentage of completion and completed contract methods

Under the completed contract method, the Construction in Process account balance will consist of

construction costs only

The seller of a good or service should recognize revenue when

each performance obligation is satisfied

a performance obligation can be

explicit, implicit or based on customary business practices

Companies expense incremental costs if these costs are incurred to obtain a contract with a customer.

false--they recognize an asset

a contract should be treated as having multiple performance obligations if

if each obligation is not highly dependent on other promises in the contract

The Billings on Construction in Process account is reported:

in either current assets or current liabilities section

what type of revenue is generally recognized as time passes

interest, rent and royalties

Under the percentage-of-completion method, how should the balances of Billings on C-I-P and Construction in Process be reported prior to the completion of a long-term contract?

net as a current asset (debit) or liability (credit)

a company does not recognize contract assets or liabilities until

one or both parties to the contract perform

he completed-contract method recognizes revenues and gross profit

only when the contract is completed

A loss in the current period on a contract expected to be profitable upon completion in a later year is:

recognized only under the completed contract method

in a consignment sale, the consignee only

recognizes revenue associated with commissions

Which method of measuring the fair value of a performance obligation is dependent on the standalone selling prices of other goods or services promised in the contract?

residual value

When the franchisor provides access to franchise rights rather than transferring control of those rights,

revenue is recognized over time

The company should disregard revenue guidance to contracts if

the contract is wholly unperformed, or if each party can unilaterally terminate the contract without compensation

n a principal-agent relationship, the agent should not use

the gross method to recognize revenue

a company accounts for a contract modification as a new contract if

the promised goods and services are distinct and the company has the right to receive an amount of consideration that reflects the standalone selling price of the promised goods or services

an indication that the customer has taken control of the goods is

the selling company has transferred the legal title of the assets

the first step of revenue recognition is

to identify the contract with customers

Conditional rights should be reported separately on the balance sheet as contract assets.

true

in determining transaction price a company must consider

variable consideration, time value of money, non-cash consideration and consideration payable