Accounting Interm I ch6

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

Blank 1: licenses or license

Multiple Select Question Select all that apply Which of the following services are commonly performed over time? (Select all that apply.) Multiple select question. Consulting engagements -Vehicle repair -Financial statement audits -Lending of money

Consulting engagements Financial statement audits Lending of money

Kline Corp. recognizes revenue over time to account for long-term contracts. The contract price is $5 million, total construction costs are $3.75 million, actual costs incurred during the first year are $1.5 million, and the revenue recognized is $2 million. The journal entry to record revenue during year 1 is: (Select all that apply.)

Debit: Cost of construction $1.5 million Debit: CIP $500,000 Credit: Revenue $2 million

Third Party

Is not directly involved in a transaction.

Multiple Choice Question Which of the following differs between revenue recognized over time and revenue recognized at completion? Multiple choice question. Total revenue Total profit The timing of recognition Total expense

The timing of recognition

A seller recognizes contract liabilities, contract assets, and accounts receivable on separate lines of its _______________ _______________.

balance sheet

Revenue recognition for services such as lending money and performing financial statement audits is typically Multiple choice question. at inception of agreement. once services are completed. over time.

over time.

Multiple Select Question Select all that apply Which of the following costs are included in a long-term construction contract? (Select all that apply.) Multiple select question. overhead administrative expense direct material direct labor

overhead direct material direct labor

The amount at which a good or service is sold separately under similar circumstances is referred to as the Multiple choice question. stand-alone selling price. fair market price. customary selling price.

stand-alone selling price.

As compared to revenue recognition over time, the total amount of gross profit recognized related to revenue upon completion is: Multiple choice question. -the same. -smaller. -greater.

the same

Payment of employee salaries

operating activities

Payment of interest on notes payable

operating activities

Question Mode Multiple Choice Question Goods or services that are not distinct are Blank______ and treated as (a) Blank______ performance obligation(s). Multiple choice question. -separated; single -combined; single -combined; multiple -separated; multiple

combined: single

Multiple Choice Question Long-term contracts require careful consideration in identifying performance obligations because these type of contracts typically include many products and services that are always distinct. are always combined. normally are sold separately by the seller. could be viewed as separate performance obligations.

could be viewed as separate performance obligations.

Issuance of common stock for cash

financing activities

Payment of cash dividends to shareholders

financing activities

Payment of principal on notes payable

financing activities

Multiple Select Question Select all that apply Which of the following agreements may qualify as contracts? (Select all that apply.) Multiple select question. implicit agreements written documents voidable agreements oral agreements

implicit agreements written documents oral agreements

Licenses typically allow customers to use the seller's Blank______ property.Multiple choice question. personal intellectual real

intellectual

Purchase of Equipment for cash

investing activities

Purchase of common stock of another corporation for cash

investing activties

Typical costs included in a construction project include Multiple choice question. interest and taxes. selling, general, and administrative. labor, materials, and overhead. property, plant, and equipment.

labor, materials, and overhead

Methods that can be used to estimate progress toward completion are referred to as -__________based and -__________based methods.

outputs & inputs

The essential difference between revenue recognition over time and upon completion relates to the Multiple choice question. amount of gross profit recognized for the project. amount of revenue recognized for the project. pattern of recognition of the related gross profit.

pattern of recognition of the related gross profit.

Question Mode Multiple Choice Question Revenue recognized each period is determined by multiplying total estimated revenue by Multiple choice question. percentage completed to date and subtracting revenue recognized in prior periods revenue recognized in prior periods percentage completed to date and adding revenue recognized in prior period

percentage completed to date and subtracting revenue recognized in prior periods

Multiple Choice Question The transaction price is the amount the seller expects to Blank_________ from the customer in exchange for providing goods and services. Multiple choice question. realize be entitled to receive receive in cash by the end of the contract period earn

be entitled to receive

Question Mode Multiple Select Question Select all that apply Which of the following conditions will cause revenue to be recognized over time? (Select all that apply.) Multiple select question. Customer controls the asset as it is created -Seller creates an asset that has no alternative use, and the seller has the right to receive payment for progress to date. -Customer consumes the benefit of the seller's work as it is performed -Performance of the service requires more than one week -Seller requires prepayment of the contract price

-Customer controls the asset as it is created -Seller creates an asset that has no alternative use, and the seller has the right to receive payment for progress to date. -Customer consumes the benefit of the seller's work as it is performed

Multiple Select Question Select all that apply What method(s) can be used to estimate progress toward completion for the purpose of recognizing revenue over time? (Select all that apply.) Multiple select question. -Output method -Variable cost method -Activity based method -Input method

-Output method -Input method

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 Multiple choice question. -use a residual value approach. -estimate it. -not allocate any portion of the contract price to the performance obligation.

-estimate it

Multiple Choice Question For a particular contract, the timing of revenue recognition is determined Multiple choice question. -individually for each performance obligation. -jointly for all performance obligations under the contract. -when all related performance obligations are satisfied.

-individually for each performance obligation.

Arthur Inc. provides services to consulting clients. Arthur should recognize the related revenue when Multiple choice question. -the contract price is realized or realizable. -the related performance obligation is satisfied. -the contract is signed.

-the related performance obligation is satisfied.

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. (Enter only one word.)

Residual approach

Multiple Select Question Select all that apply Which of the following must a seller recognize as separate line items on the balance sheet? (Select all that apply.) Multiple select question. Bad debt expense Accounts receivable Contract assets Contract liabilities

Accounts receivable Contract assets Contract liabilities

Agent

Acts as a facilitator for helping seller transact with buyers

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: Multiple choice question. -Matching principle -Step 5 of the revenue recognition principle -Core revenue recognition principle -Realization principle

Core revenue recognition principle

What is the journal entry to recognize gross profit when revenue is recognized upon completion of a long-term construction project? Multiple choice question. -Debit Billings from Long-Term Contracts; Credit Construction in Progress -Debit Construction in Progress and Debit Cost of Construction; Credit Revenue from Long-Term Contracts -Debit Construction in Progress; Credit Accounts Receivable and Cost of Construction -Debit Cost of Construction; Credit Revenue from Long-Term Contracts

Debit Construction in Progress and Debit Cost of Construction; Credit Revenue from Long-Term Contracts

Sale of Equipment for cash

Financing activities

Principal

Has primary responsibility for delivering goods or services

Multiple Choice Question An essential characteristic of a contract is that all parties to the contract are committed to Multiple choice question. -performing their obligations and enforcing their rights -modifying the contract when and if necessary signing a written contract

Multiple Choice Question -performing their obligations and enforcing their rights

Inflows or other enhancements of assets or settlements of an entity's liabilities from delivering or producing goods, rendering services, or other activities that constitute its ongoing major or central operations are Blank______. Multiple choice question. losses revenues expenses gains

Revenues

True or False Question True or false: An estimated overall loss on a long-term contract is fully recognized in the first period the loss becomes evident, regardless of the revenue recognition method used. True false question.TrueFalse

True

Prepayments by customers for future goods or services should initially be recorded as Multiple choice question. revenue. a noncurrent asset. deferred revenue. a current asset.

deferred revenue.

For a promise to provide a good or service to be accounted for as a separate performance obligation, the good or service must be Multiple choice question. -distinct from other goods and services in the contract. -explicitly identified as a separate performance obligation in the contract. -significant in absolute and relative terms. -sold separately from the other goods and services in the contract.

distinct from other goods and services in the contract.

issuance of bonds payable in exchange for land and building

non-cash investing and financing activities

Collection of cash from customers

operating activities

Multiple Choice Question 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 Multiple choice question. -performance obligation. -stand-alone price. -transaction price. -distinct amoun

transaction price.

True or false: A prepayment from a customer typically creates a performance obligation. True false question.TrueFalse

False

Cash proceeds from notes payable

financing activities

Multiple Select Question Select all that apply Which of the following support the conceptual basis for separating contractual promises into several performance obligations? (Select all that apply.) Multiple select question. -Simplifies revenue recognition -Large contracts can be broken into manageable parts -Promises that can be viewed on a stand-alone basis should be separated -Financial statements better reflect timing of transfer of goods and services

-Promises that can be viewed on a stand-alone basis should be separated -Financial statements better reflect timing of transfer of goods and services

Multiple Select Question Select all that apply Which of the following are key indicators that control of goods or services has been transferred to the customer? (Select all that apply.) Multiple select question. -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 Customer has legal title to the asset Customer has an obligation to pay

Which of the following are key indicators that control of goods or services has been transferred to the customer? (Select all that apply.)

Customer has legal title to the asset Customer accepted 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? (Select all that apply.) Multiple select question. Customer signed a legally binding contract Customer has physical possession of the asset Customer has legal title to the asset Customer accepted asset

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

Multiple Choice Question What is the correct journal entry to recognize profit for a long-term construction project for which revenue is recognized over time? Multiple choice question. Debit construction in progress and debit cost of construction; credit revenue from long-term contracts Debit billings on construction and debit accounts receivable; credit revenue from long-term contracts Debit cost of construction; credit revenue from long-term contracts Debit billings on construction contract; credit construction in progress

Debit construction in progress and debit cost of construction; credit revenue from long-term contracts

When is a loss recognized on a long-term contract? Multiple choice question. When the billings are not collected during the period. In the first period in which the loss become evident. When the construction costs are in excess of billings. In the period the contract is completed.

In the first period in which the loss become evident.

Select all that apply Which of the following are indicators that a company is a principal? (Select all that apply.) Multiple select question. -It has primary responsibility for providing the product or service -it owns the inventory prior to delivery -It receives a commission for facilitating the transfer of goods or services. -it contracts with the buyer -it sets the sales price

It has primary responsibility for providing the product or service it owns the inventory prior to delivery it sets the sales price

Multiple Select Question Select all that apply Which methods may be used to estimate the stand-alone prices of goods and services? (Select all that apply.) Multiple select question. Expected cost plus margin approach Adjusted market assessment approach Current replacement cost approach Residual approach

Multiple Select Question Select all that apply Multiple select question Expected cost plus margin approach Adjusted market assessment approach Residual approach

Multiple Choice Question 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 Multiple choice question. -Munch combines the materials, labor, and use of machinery and tools to construct a single complete building. it is very difficult to identify separate performance obligations for each of the inputs to the construction project. the material, labor, and use of machinery and tools are not separately listed in the contract.

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

Xavier Inc. is adding two more floors to Tamara Company's existing office building. Revenue related to this service likely should be recognized Multiple choice question. -once the project is completed. -over time. -at the point when work begins

Over time

Select all that apply Which of the following will not differ between revenue recognized over time and revenue recognized at completion? (Select all that apply.) Multiple select question. Total revenue The timing of recognition Total profit Total expense

Total revenue Total profit Total expense

Question Mode Multiple Select Question Select all that apply Which of the following are included in the journal entry required to record the collection of cash from a customer related to a long-term construction contract? (Select all that apply.) Multiple select question. credit billings on construction contract credit accounts receivable debit construction in progress debit cash N

credit accounts receivable debit cash

Select all that apply Which of the following are included in the journal entry required to record construction costs for a long-term construction contract? (Select all that apply.) Multiple select question. credit billings on construction contract credit raw materials debit construction in progress debit cash

credit raw materials debit construction in progress

Multiple Select Question Select all that apply Malone Corp. properly recognizes revenue upon completion of a long-term construction project. Malone has the following information for a 3-year contract. Year 1 Year 2 Year 3 Billings on contracts 10,000 10,000 30,000 Construction costs 8,000 8,000 8,000 The journal entry required at the end of the contract to recognize revenue and expenses will include (Select all that apply.) Multiple select question. credit billings on contracts $50,000. debit construction in progress $26,000. debit cost of construction $24,000. debit billings on contracts $26,000. credit revenue from contracts $50,000.

debit construction in progress $26,000. debit cost of construction $24,000. credit revenue from contracts $50,000.

Fill in the Blank Question Fill in the blank question. 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 approach

Multiple Choice Question The formula: total estimated revenue times percentage completed to date less revenue recognized in prior periods is used to measure: Multiple choice question. progress made toward completion of performance obligation revenue recognized for the current period revenue recognized over the contract period

revenue recognized for the current period