IFRS 15

Contract costs of a construction contract comprise all of the following, except

General administration costs for which reimbursement is not specified in the contract

When goods are consigned out, profits should be recognized by the consignor when the

Goods are sold by the consignee

Income recognized under the installment method equals cash collected multiplied by

Gross profit percentage

According to the installment method of accounting, gross profit on an installment sale is recognized in income

In proportion to the cash collections

How should the balances of progress billings and construction in progress be reported prior to the completion of a long-term contract?

Net, as current asset if debit balance, and current liability if credit balance

If an entity cannot estimate reliably the outcome of a construction contract, revenue should be recognized

Only to the extend of the costs recoverable

Goods on consignment should be included in the inventory of

the consignor but not the consignee.

Which of the following projects undertaken by an entity should be accounted for as a construction contract?

A large boat being constructed for a third party under a specifically negotiated contract

Jel Co., a consignee, paid the freight costs for goods shipped from Dale Co., a consignor. These freight costs are to be deducted from Jel's payment to Dale when the consignment goods are sold. Until Jel sells the goods, the freight costs should be included in Jel's

Accounts receivable

An entity shall disclose all of the following in relation to a construction contract, except

Advances received in cash, analyzed according to each material contract

According to the cost recovery method of accounting, gross profit on an installment sale is recognized in income

After cash collections equal to the cost of goods sold have been received

Which of the following costs should be included in the contract costs?

All of these are included in contract costs

Which condition is necessary to have all units in a multiple deliverables arrangement be considered separate units of accounting?

All of these conditions are necessary for a separate units of accounting

Franchise fee revenue shall be recognized when all material services or conditions have been substantially performed or satisfied by the franchisor. Substantial performance means

All of these define substantial performance by the franchisor

If the contract of sale has a right of return, an entity should recognize which of the following?

All of these should be recognized in a sale with a right of return

Which statement is true when the outcome of construction contract cannot be estimated reliably?

All of these statements are true

Which statement is true in contract of sale with a right of return?

All of these statements are true about a sale with a right of return.

How should earned but unbilled revenue on a long-term construction contract be disclosed if the percentage of completion method is used?

As construction in progress under current assets

Continuing franchise fees shall be recorded by the franchisor

As revenue when earned and receivable from the franchise

A construction entity signed a contract to build a theater over a period of two years and with this contract also signed a maintenance contract for five year. Both contracts are negotiated as a single package and are closely related to each other. The two contracts should be

Combined and treated as a single contract

In accounting for sales on consignment, sales revenue and the related cost of goods sold should be recognized by the

Consignor when notification is received that the consignee has sold the goods.

In accounting for a long-term construction contract using the percentage of completion method, the amount of income recognized in any year would be added to

Construction in progress

Which of the following costs shall form part of contract costs of long-term construction contract?

Construction overheads including costs such as the preparation and processing of construction personnel payroll

The milestone method of revenue recognition provides that if a substantive milestone is achieved, what amount of revenue is recognized?

Contingent revenue is recognized in its entirety

In accounting for a long-term construction contract using the percentage of completion method, the progress billings on contracts account is a

Contra current asset account

The gross amount due from customers presented as an asset is equal to

Costs incurred plus recognized profit less the sum of recognized loss and progress billings

DEF is the consignee for 1,000 units of product X for ABC Company. ABC should recognize the revenue from these 1,000 units when

DEF sells the goods and informs ABC of the sale.

Which of the following costs shall not form part of contract costs of long-term construction contract?

Depreciation of idle plant and equipment not used on a particular contract

Under IFRS, how may an entity satisfy a performance obligation under in a contract with customers?

Either of the statements

What is the measurement of franchise revenue recognized from the franchise agreement?

Fair value of the consideration received or receivable.

If the beginning inventory is understated, the cost of goods sold is overstated and net income is overstated

False

Under the LIFO method of inventory valuation, the ending merchandise inventory would be valued at the purchase price of the most recent purchases

False

When merchandise is left on consignment with a consignee, it should be included in the ending inventory of the consignee.

False

The percentage of completion of a construction is based on all of the following, except

Progress payments and advances received from customers

When is it probable that total contract costs on a fixed price contract will exceed total contract revenue, the expected loss should be

Recognized as expense immediately

An entity has multiple deliverables arrangement in which all units are considered separate units of accounting. The amount paid for the arrangement among the separate units based on

Relative fair value or what the vendor could sell the component on a stand-alone basis

The milestone method may be used to recognize revenue for

Research and development arrangement

What is the core principle of IFRS 15 Revenue from contracts with customers?

Revenue should be recognized when an entity transfers control of goods or services to a customer at an amount to which the entity expects to be entitled.

The percentage of completion method must be used when certain conditions exist. Which of the following is not one of the conditions?

The client can be expected to satisfy some of the obligations under the contract

All of the following could be valid reasons why the expected revenue from a fixed price construction contract should be increased from the original contract price, except

The contractor has incurred additional costs due to errors made by the employees

In selecting an accounting method for a long-term construction contract, the principal factor to be considered should be

The degree to which a reliably estimate of the progress toward contract completion is practicable

Which is one of the conditions that must exist for an entity to recognized revenue on separate units under a multiple deliverables arrangement?

The delivered item has value on a stand-alone basis and can be sold separately

Contract revenue in construction contract comprises

The initial amount of revenue agreed in the contract, variation in contract work, claim and incentive payment

What is the accounting treatment of the transaction price when a contract with a customer has multiple performance obligations?

The transaction price shall be allocated to the different performance obligations by reference to their relative standalone selling prices.

Which statement best justifies the use of the cost recovery method of revenue recognition to account for installment sales?

There is no reasonable basis for estimating collectability

Merchandise received by a retailer to sell on consignment should be excluded from the ending merchandise inventory of the retailer

True

Under the FIFO method of inventory valuation, the assignment of cost to merchandise sold is in the same order in which the merchandise was purchased

True

The installment method of accounting may be used if the

Ultimate amount collectible is indeterminate

Under IFRS 15, when shall a franchisor recognize revenue from contingent franchise fee or revenue for a sales-based royalty?

When both A and B events occur.

When would an entity use the installment sales method of revenue recognition?

When installment sales are material and there is no reasonably basis for estimating collectivity

When shall an entity recognize revenue from contracts with customers?

When or as the entity satisfied the performance obligation

When shall the increment cost of obtaining a contract with a customer be recognized as an asset?

When the entity expects to recover those costs.

In which of the following instances will revenue from contracts with customers be recognized at a point in time instead of over time?

When the entity has transferred physical possession and legal title to the asset to the customer.

IFRS 15 provides that initial franchise fee shall be recognized as revenue over time (percentage of completion method) if any one of the following criteria provided below is met. Which of the following indicator shows that the initial franchise fee shall be recognized as revenue at a point in time instead over time?

When the franchisee has legal title to the franchise and has the significant risks and rewards of ownership of the franchise.

Under IFRS 15, how shall revenue from contracts with customers such as revenue from initial franchise fee be recognized by the franchisor?

When the franchisor satisfies the performance obligation under the franchise agreement.

Revenue is recognized by the consignor when the

consignor receives an account sales from the consignee