CH 18 - Revenue Recognition
The best measure of the fair value of a performance obligation is A. residual value. B. adjusted market assessment. C. expected cost plus a margin. D. standalone selling price.
D. standalone selling price.
A performance obligation may be based on customary business practice. True False
TRUE
On January 1, 2017, Fullbright Company sold goods to Blue Dirt Company for $400,000 in exchange for a 4-year, zero-interest-bearing note with a face amount of $629,406 (imputed rate of 12%). The goods have an inventory cost on Fullbright's books of $240,000. What amount of Interest Revenue should Fullbright recognize in 2017? A) $ 48,000 B) $229,406 C) $ 75,529 D) $ 57,352
A) $ 48,000
Sherman Company enters into a contract with a customer to build a warehouse for $400,000, with a performance bonus of $100,000 that will be paid based on the timing of completion. The amount of the performance bonus decreases by 20% per week for every week beyond the agreed-upon completion date. The contract requirements are similar to contracts that Sherman has performed previously, and management believes that such experience is predictive for this contract. Management estimates that there is a 50% probability that the contract will be completed by the agreed-upon completion date, a 30% probability that it will be completed 1 week late, and a 20% probability that it will be completed 2 weeks late. What is the total transaction price for this revenue arrangement? A) $486,000 B) $460,000 C) $480,000 D) $500,000
A) $486,000
The following information is available about a signed agreement between two entities: •The entities have agreed to specific performance obligations.•The entities have agreed on a price related to the performance obligations. •No work has begun on the performance obligations, and the contract is cancelable without payment of penalty or other consideration. •It is probable that the company completing the work will collect the agreed-upon consideration. Does a contract exist between the entities to which the revenue recognition criteria may be applied? A) A contract to which the revenue recognition criteria applies does not exist because it is cancelable without penalty and no work on the performance obligations has begun. B)A contract to which the revenue recognition criteria applies exists because it identifies specific performance obligations and collectibility of the consideration is probable. C)A contract to which the revenue recognition criteria applies does not exist because the transaction price has not yet been allocated to the specific performance obligations. D) A contract to which the revenue recognition criteria applies exists because the contract includes important terms, such as the agreed-upon price and specific performance obligations.
A) A contract to which the revenue recognition criteria applies does not exist because it is cancelable without penalty and no work on the performance obligations has begun.
Which type of transaction generally results in revenue being recognized with the passage of time? A) Customer controls the asset as it is created or the company does not have an alternative use for the asset. B)Sale of product from inventory. C) Sale of an asset other than inventory. D) Rendering a service.
A) Customer controls the asset as it is created or the company does not have an alternative use for the asset.
The third step in the process for revenue recognition is to A. determine the transaction price. B. identify the separate performance obligations in the contract. C. allocate transaction price to the separate performance obligations. D. recognize revenue when each performance obligation is satisfied.
A. determine the transaction price.
Foghorn Company entered into a sales transaction in which it agreed to receive common stock from Leghorn Corporation as payment for services provided to Leghorn Corporation. The journal entry to record the receipt of payment for the sales transaction will include a A) Debit to Leghorn Investment. B) Debit to cash. C) Credit to Common Stock. D) Credit to Noncash Consideration.
A) Debit to Leghorn Investment.
Lavender Corporation sells 100 jars of essential oil to Bed, Bath, and Relax on December 1, 20X5, for $10 each on account. Lavender offers a right to return the product for any reason. Based on past sales, Lavender expects Bed, Bath, and Relax to return 5 jars. What adjusting journal entry, if any, should Lavender record on December 31, 20X5, to reflect Bed, Bath, and Relax's expected sales returns? A) Dr Sales Returns and Allowances Cr Allowance for Sales Returns and Allowances $50 B) No entry required because Bed, Bath, and Relax has not returned any jars. C) Dr Sales Returns and Allowances Cr Accounts Receivable $50 D) Dr Sales Revenue Cr Accounts Receivable $50
A) Dr Sales Returns and Allowances Cr Allowance for Sales Returns and Allowances $50
Kinnamont Company manufactures farming equipment that includes navigational systems as part of the standard equipment package and offers optional training on any navigational systems for an additional fee. Smith Company enters into a contract with Kinnamont that includes a combine, a navigational system, and training. Identify the performance obligations to which Smith should allocate the transaction price: A) The combine including the navigational system and the training as two separate performance obligations. B) The combine, the navigational system, and the training account for one performance obligation because they are all part of the same contract. C) No performance obligations exist because the work on the contract, including the training, has not begun. D) The combine, the navigational system, and the training as three separate performance obligations.
A) The combine including the navigational system and the training as two separate performance obligations.
A company enters into a contract that includes three separate performance obligations. The standalone prices are not readily available for the performance obligations. How should the company proceed in allocating the transaction price? A) The company should estimate the standalone prices of the performance obligations in order to allocate the transaction price based on the proportion of the total standalone price represented by each performance obligation. B) Because the standalone pricing is not available, the company should allocate the transaction price evenly among the three performance obligations. C) The company is not able to allocate the transaction price at this time; it should wait until other customers engage the company for similar performance obligations and allocate the transaction price based on the pricing from those contracts. D) Because the company does not have the stand-alone pricing readily available, it should not separate the performance obligations and should allocate the sales price to a single performance obligation.
A) The company should estimate the standalone prices of the performance obligations in order to allocate the transaction price based on the proportion of the total standalone price represented by each performance obligation.
An indication that the customer has not taken control of the good or service is A) the customer has no significant risks or rewards of ownership. B) the selling company has transferred legal title to the asset. C) the selling company has right to payment for the good or service. D) the customer has physical possession of the asset.
A) the customer has no significant risks or rewards of ownership.
In determining the transaction price, the company must consider: A)variable consideration, non-cash consideration, time value of money, and consideration payable. B)the time value of money, but not consideration payable. C) non-cash consideration, but not the time value of money. D) variable consideration, but not non-cash consideration.
A)variable consideration, non-cash consideration, time value of money, and consideration payable.
Meyer & Smith is a full-service technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Carla Vista Corporation purchased computer equipment, installation and training for a total cost of $129600 on March 15, 2021. Estimated standalone fair values of the equipment, installation, and training are $82500, $54000, and $25500 respectively. The transaction price allocated to equipment, installation and training is A. $66000, $43200, $20400 respectively. B. $82500, $54000, $25500 respectively. C. $129600 for the entire bundle. D. $43200, $43200, $43200 respectively.
A. $66000, $43200, $20400 respectively.
Pharoah Pharmaceuticals entered into a licensing agreement with Zenith Lab for a new drug under development. Pharoah will receive $8300000 if the new drug receives FDA approval. Based on prior approval, Pharoah determines that it is 90% likely that the drug will gain approval. The transaction price of this arrangement should be A. $8300000. B. $830000. C. $7470000. D. $0 until approval is received.
A. $8300000.
When a customer purchases a product but is not yet ready for delivery, this is referred to as A. a bill-and-hold arrangement B. a consignment. C. a repurchase agreement. D. a principal-agent relationship.
A. a bill-and-hold arrangement
Companies can use the expected value to estimate variable consideration when A. a company has a large number of contracts with similar characteristics. B. a company has a small number of contracts with similar characteristics. C. the contract has only two possible outcomes. D. a company can use the most likely amount in a range of possible outcomes.
A. a company has a large number of contracts with similar characteristics.
A company has satisfied its performance obligation when the A. company has transferred physical possession of the asset. B. company has legal title to the asset. C. company has significant risks and rewards of ownership. D. company has received payment for goods or services.
A. company has transferred physical possession of the asset.
Meyer & Smith is a full-service technology company. They provide equipment, installation services as well as training. Customers can purchase any product or service separately or as a bundled package. Ivanhoe Corporation purchased computer equipment, installation and training for a total cost of $141015 on March 15, 2021. Estimated standalone fair values of the equipment, installation and training are $73500, $58800 and $33600 respectively. The journal entry to record the transaction on March 15, 2021 will include a A. credit to Unearned Service Revenue of $28560. B. credit to Sales Revenue for $141015. C. credit to Service Revenue of $58800. D. debit to Unearned Service Revenue of $33600.
A. credit to Unearned Service Revenue of $28560.
When multiple performance obligations exist in a contract, they should be accounted for as a single performance obligation when A. each service is interdependent and interrelated. B. the product is distinct within the contract. C. both performance obligations are distinct but interdependent. D. determination cannot be made.
A. each service is interdependent and interrelated.
The first step in the process for revenue recognition is to A. identify the contract with customers. B. determine the transaction price. C. identify the separate performance obligations in the contract. D. aLlocate transaction price to the separate performance obligations.
A. identify the contract with customers.
The transaction price A. is the amount of consideration that a company expects to receive from a customer. B. excludes discounts, volume rebates, coupons and free products, or services. C. excludes time value of money if the contract involves a significant financing component. D. does not consider noncash consideration such as donations, gifts, equipment or labor.
A. is the amount of consideration that a company expects to receive from a customer.
On January 15, 2021, 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 March 31, 2021. B. recorded on March 1, 2021. C. recorded on January 15, 2021. D. recorded on April 30, 2021.
A. recorded on March 31, 2021.
Consideration paid or payable to customers A. reduces the consideration received and the revenue to be recognized. B. includes prompt settlement discount which increases revenues. C. includes discounts which reduces the cost of purchases to the company. D. includes volume rebates which increases the cost to the customer.
A. reduces the consideration received and the revenue to be recognized.
An indication that the customer has taken control of the good or service is that A. the selling company has transferred legal title to the asset. B. the customer has no significant risks or rewards of ownership. C. the selling company has no right to payment for the good or service. D. the selling company has physical possession of the asset.
A. the selling company has transferred legal title to the asset.
Chelsea sells equipment to a customer. The total selling price includes installation and training services. Companies other than Chelsea also provide installation and training services, but the customer has chosen to have Chelsea perform these tasks. What is (are) Chelsea's performance obligation(s)? A) Two separate performance obligations: one performance obligation consisting of the sale of the equipment and the sale of a second performance obligation: the sale of a separate unit (installation and training). B) Three separate performance obligations: the sale of the equipment, the sale of its installation and the sale of training services. C) One performance obligation: the sale of unit (equipment, installation, training). D) Two separate performance obligations: the sale of a performance obligation consisting of the sale of the equipment and its installation, and a second performance obligation: the sale of a separate unit (training).
B) Three separate performance obligations: the sale of the equipment, the sale of its installation and the sale of training services
The seller of a good or service should recognize revenue when A) they determine the transaction price. B) each performance obligation is satisfied. C) they identify the contract with customers. D) they identify the separate performance obligations in the contract.
B) each performance obligation is satisfied.
A company accounts for a contract modification as a new contract if A) the prospective approach is used. B) 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. C)the promised goods and services are distinct. D) the company has the right to receive an amount of consideration that reflects the standalone selling price of the promised goods or services.
B) 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.
ClipClop Company sells horseshoes to customers at a discount of 4% if the customer orders more than 10,000 horseshoes in a year. The price per shoe is $2. In April, Oats Company orders 4,000 horseshoes from ClipClop. Based on past experience with Oats Company, ClipClop expects Oats to meet the volume threshold of 10,000 horseshoes by the end of the year. What amount of revenue should ClipClop record in connection with the April sale? A)$0 because ClipClop does not know if Oats will meet the volume discount threshold B)$7,680 C)$8,000 D) $20,000
B)$7,680
Bret Company sold 3,000 Holsks during 2017 at a total price of $12,000,000, with a warranty guarantee that the product was free of any defects. The cost of Holsks sold is $7,200,000. The term of the assurance warranty is two years, with an estimated cost of $80,000. In addition, Bret sold extended warranties related to 1,100 Holsks for 3 years beyond the 2-year period for $110,000. Bret should recognize Unearned Warranty Revenue in 2017 of A. $ 0 B. $110,000 C. $ 80,000 D. $190,000
B. $110,000
To address inconsistencies and weaknesses in revenue recognition, a comprehensive revenue recognition standard was developed entitled the A. Revenue Recognition Principle. B. Revenue from Contracts with Customers. C. Principle-based Revenue Accounting. D. Rules-based Revenue Accounting.
B. Revenue from Contracts with Customers.
In a bill-and-hold arrangement, which of the following is not one of the criteria which must be met for the customer to have obtained control of the product? A.The product currently must be ready for physical transfer to the customer. B. The product must be physically located in the seller's warehouse. C. The seller cannot have the ability to use the product or to direct it to another customer. D. The reason for the bill-and-hold arrangement must be substantive.
B. The product must be physically located in the seller's warehouse.
The fourth step in the process for revenue recognition is to A. recognize revenue when each performance obligation is satisfied. B. allocate transaction price to the separate performance obligations. C. identify the separate performance obligations in the contract. D. determine the transaction price.
B. allocate transaction price to the separate performance obligations.
The role of the agent in a Principal-Agent relationship is to A. develop and maintain goodwill of the principal's customers. B. arrange for the principal to provide goods or services to a customer. C. market the principal goods and services to prospective customers. D. provide the goods or services for a customer.
B. arrange for the principal to provide goods or services to a customer.
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 forecasted cost of satisfying performance obligation. D. based on selling price from the company's competitors.
B. based on what the company could sell the goods for on a standalone basis.
Revenue from a contract with a customer A. can be recognized even when a contract is still pending. B. cannot be recognized until a contract exists. C. is recognized even if the contract is still wholly unperformed. D. is recognized when the customer receives the rights to receive consideration
B. cannot be recognized until a contract exists.
On November 1, 2021, Ivanhoe Farm entered into a contract to buy a $140000 harvester from John Deere. The contract required Ivanhoe Farm to pay $140000 in advance on November 1, 2021. The harvester (cost of $100000) was delivered on November 30, 2021. The journal entry to record the contract on November 1, 2021 includes a A. credit to Sales Revenue for $140000. B. credit to Unearned Sales Revenue for $140000. C. credit to Accounts Receivable for $140000. D. debit to Unearned Sales Revenue for $140000.
B. credit to Unearned Sales Revenue for $140000.
The last step in the process for revenue recognition is to A. allocate transaction price to the separate performance obligations. B. recognize revenue when each performance obligation is satisfied. C. determine the transaction price. D. identify the contract with customers.
B. recognize revenue when each performance obligation is satisfied.
A shoe retailer allows customers to return shoes within 90 days of purchase. The company estimates that 5% of sales will be returned within the 90-day period. During the month, the company has sales of $200,000 and returns of sales made in prior months of $5,000. What amount should the company record as net sales revenue for new sales made during the month? A) $185,000 B) $195,000 C) $190,000 D)$200,000
C) $190,000
On January 1, 2017, Fullbright Company sold goods to Blue Dirt Company for $400,000 in exchange for a 4-year, zero-interest-bearing note with a face amount of $629,406 (imputed rate of 12%). The goods have an inventory cost on Fullbright's books of $240,000. What amount of Sales Revenue should Fullbright recognize in 2017? A) $229,406 B) $629,406 C) $400,000 D) $240,000
C) $400,000
Shaw Company engages Maya Company to produce a large machine, install the machine, and train their employees on the machine. The machine, installation, and training are distinct, and Maya determines that the contract includes three separate performance obligations. The machine, installation, and training typically cost $800,000, $100,000, and $100,000 respectively when each is provided in a separate contract. Shaw and Maya agree to a total contract price of $920,000. How much of the contract price should Maya allocate to the machine, installation, and training, respectively? A) $800,000; $100,000; $100,000 B) $736,000; $184,000 C) $736,000; $92,000; $92,000 D) $732,000; $94,000; $94,000
C) $736,000; $92,000; $92,000
Allocating a transaction price to multiple performance obligations includes which of the following steps: A) Consolidate the components of the contract to two performance obligations because a contract should not have more than two performance obligations. B) Complete each performance obligation before recognizing any revenue from the contract. C) Identify distinct goods and/or services as separate performance obligations. D) Obtain an independent appraisal of the value of services identified as a performance obligation.
C) Identify distinct goods and/or services as separate performance obligations.
A company incurred costs to fulfill a contract that has a four-year life. The costs are a direct result of the contract and would not have been incurred had the contract not existed. How should the costs to fulfill the contract be accounted for? A) Expensed in the period incurred because the company paid for the costs in the current period B) Recorded as a liability and amortized over four years C) Recorded as an asset and amortized over four years D) Recorded as a liability and expensed in the period paid
C) Recorded as an asset and amortized over four years
The new standard, Revenue from Contracts with Customers, A)adopts criteria that de-emphasize the importance of contracts with customers. B) adopts "earned and realized" criteria. C) adopts an asset-liability approach for revenue recognition. D) adopts a revenue-gain approach for revenue recognition.
C) adopts an asset-liability approach for revenue recognition.
The use of the net method of recognizing revenue by an agent A. could result in an understatement of the agent's revenue. B. Is appropriate as long as both revenue and costs are included. C. could result in an overstatement of the agent's revenue. D. is the correct method in a principal-agent relationship.
D. is the correct method in a principal-agent relationship.
Seadrill Engineering licensed software to oil-drilling firms for 5 years. In addition to providing the software, the company also provides consulting services and support to ensure smooth operation of the software. The total transaction price is $420,000. Based on standalone values, the company estimates the consulting services and support have a value of $120,000 and the software license has a value of $300,000. Assuming the performance obligations are not interdependent, the journal entry to record the transaction includes A. a credit to Sales Revenue of $420,000. B. a credit to Service Revenue of $120,000. C. a credit to Sales Revenue for $300,000 and a credit to Unearned Service Revenue of $120,000. D. a credit to Unearned Service Revenue of $120,000.
C. a credit to Sales Revenue for $300,000 and a credit to Unearned Service Revenue of $120,000.
Hendrix Inc., an equipment dealer, sells equipment on January 1, 2016, to Jimi Company for $200,000. Also, on January 1, 2016, Hendrix agrees to repurchase this equipment from Jimi Company on December 31, 2017, for a price of $233,280. At 1/1/16, Hendrix should record A)sales revenue of $200,000. B) sales revenue of $200,000 and interest expense of $33,280. C. a liability of $200,000. D. sales revenue of $200,000 and a liability of $33,280.
C. a liability of $200,000.
Ivanhoe Choice sells natural supplements to customers with an unconditional sales return if they are not satisfied. The sales returns extends 60 days. On February 10, 2021, a customer purchases $3000 of products (cost $1500). Assuming that based on prior experience, estimated returns are 10%. The journal entry to record the expected sales return and cost of goods sold includes a A. debit to Cash and a credit to Sales Revenue of $3000. B. debt to Cost of Goods Sold and credit to Inventory for $1500. C. debit to Allowance for Sales Returns of $300 and a credit to Cost of Goods sold of $150. D. credit to Estimated Inventory Returns of $150.
C. debit to Allowance for Sales Returns of $300 and a credit to Cost of Goods sold of $150.
A contract should be treated as having multiple performance obligations if A. each service provided in the contract is interdependent. B. the contract creates enforceable rights or obligations. C. each performance obligation is not highly dependent on other promises in the contract. D. each service provided in the contract is interrelated.
C. each performance obligation is not highly dependent on other promises in the contract.
When a company has an obligation or right to repurchase an asset for an amount greater than or equal to its selling price, the transaction should be treated as a A. repurchase transaction. B. put option. C. financing transaction. D. outright sale.
C. financing transaction.
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 not required to determine transaction price, if the payment is scheduled to occur in more than a year. C. the time value of money is used to determine the fair value of the transaction. D. the transaction amount should be based on the current sales price of goods or services.
C. the time value of money is used to determine the fair value of the transaction.
In a consignment sale, the consignee A. recognizes both commission revenue and sales revenue. B. makes a journal entry when the consigned merchandise is received. C. records advertising paid for the consignment as an expense. D. records a payable when consigned merchandise is sold.
D. records a payable when consigned merchandise is sold.
Sally collects a nonrefundable up-front fee of $192 when a new customer signs up for a 24-month contract for services. A monthly fee of $32 is also assessed for each customer. How much revenue does Sally record on the date the contract is signed? A) $40 B) $224 C) $192 D) $0
D) $0
Stossel Company sells 300 units for $200 each to Liberty Inc. for cash. Stossel allows Liberty to return any unused product within 30 days and receive a full refund. The cost of each product is $120. To determine the transaction price, Stossel decides that the approach that is most predictive of the amount of consideration to which it will be entitled is the most likely amount. Using the most likely amount, Stossel estimates that ten (10) units will be returned, the costs of recovering the units will be immaterial, and the returned units are expected to be resold at a profit. What amount of refund liability should Stossel record at the time of sale? A)$1,200 B)$ 0 C) $800 D) $2,000
D) $2,000
Mocha purchases equipment, installation, and training from Lynne for a price of $1,000,000 and chooses Lynne to do the installation. Lynne charges the same price for the equipment irrespective of whether it does the installation or not. (Some companies do the installation themselves because they either prefer their own employees to do the work or because of relationships with other customers.) The price of the installation service is estimated to have a fair value of $20,000. The fair value of the training sessions is estimated at $40,000. Other companies can also provide these training services. Mocha is obligated to pay Lynne the $1,000,000 upon the delivery and installation of the equipment. Lynne delivers the equipment on May 1, 2017, and completes the installation of the equipment on July 1, 2017. Training related to the equipment starts once the installation is completed and lasts for 1 year. The equipment has a useful life of 8 years. What amount is recorded by Lynne as Unearned Service Revenue at 7/1/17? A)$18,868 B)$0 C)$20,000 D) $37,736
D) $37,736
One criteria that indicates that a company should disregard revenue guidance for contracts is when A) each party's rights regarding the goods or services to be transferred can be identified. b) the contract has commercial substance. C) the payment terms for the goods and services to be transferred can be identified. D) each party can unilaterally terminate the contract without compensation.
D) each party can unilaterally terminate the contract without compensation.
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? A) standalone selling price. B) adjusted market assessment. C) expected cost plus a margin. D) residual value.
D) residual value.
On June 1, 2021, Crane & Sons sold equipment to James Landscaping Service in exchange for a zero-interest bearing note with a face value of $122400, with payment due in 12 months. The fair value of the equipment on the date of sale was $115200. The amount of revenue to be recognized on this transaction in 2021 is A. $7200. B. $122400. C. $115200. D. $115200 sales revenue and $4200 interest revenue.
D. $115200 sales revenue and $4200 interest revenue.
New Age Computers manufactures and sells pagers and radio paging systems which include a 180 day warranty on product defects. It also sells an extended warranty which provides an additional two years of protection. On May 10, it sold a paging system for $4,500 and an extended warranty for another $1,400. The journal entry to record this transaction would include A. a credit to Warranty Revenue of $5,900. B. a credit to Sales of $4,500 and a credit to Warranty Revenue of $1,400. C. a credit to Warranty Revenue of $1,400. D. a credit to Unearned Warranty Revenue of $1,400.
D. a credit to Unearned Warranty Revenue of $1,400.
P & G Auto Parts sells parts to Sandhill Car Repair during 2021. P&G offers rebates of 1% on purchases up to $60000 and 2% on purchases above $60000 if the customer's purchases for the year exceed $200000. In the past, Sandhill normally purchases $300000 in parts during a calendar year. On March 25, 2021, Sandhill Car Repair purchased $70000 of parts. The journal entry to record the purchase includes a A. debit to Accounts Receivable for $70000. B. credit to Sales Revenue for $69400. C. debit to Accounts Receivable for $69400. D. credit to Sales Revenue for $69200.
D. credit to Sales Revenue for $69200.
The second 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. determine the transaction price. D. identify the separate performance obligations in the contract.
D. identify the separate performance obligations in the contract.
In a principal-agent relationship, the agent should use the gross method to recognize revenue. True False
FALSE
The first step of the revenue recognition process is to determine the transaction price. True False
FALSE
Sales with rights of return should not be recognized as revenue due to the contingent refund liability. True False
False
Companies recognize revenue over a period of time if (1) the customer controls the asset as it is created or (2) the company does not have an alternative use for the asset, with the following conditions: (a) the customer receives benefits as the company performs, and (b) the company has a right to payment. True False
TRUE
Conditional rights should be reported separately on the balance sheet as contract assets. True False
TRUE
The revenue recognition principle states that revenue is recognized when the performance obligation is satisfied. True False
TRUE
When a sales transaction involves a significant financing component, the fair value is determined either by measuring the consideration received or by discounting the payment using an imputed interest rate. True False
TRUE
A contract is an agreement between two parties that creates enforceable rights or obligations. True False
True
Most revenue transactions pose few problems for revenue recognition because often the transaction is initiated and completed at the same time. True False
True
The transaction price is the amount of consideration that a company expects to receive from a customer in exchange for transferring a good or service. True False
True
