CH6 ACC 3321

Ronin Corp. recognizes revenue over time related to a long-term contract. The contract price is $5,000,000, total expected construction costs are $3,000,000, and actual costs incurred during the first year are $300,000. Actual costs for year 2 are $900,000 and estimated cost to complete is $1,800,000. The amount of previously recognized revenue is $500,000. Revenue recognized for year 2 is:

1.5

Multiple Choice Question Main Company sells a video streaming device for $100. A one-year subscription to unlimited video streaming costs $150. Alternatively, customers can rent videos on demand or subscribe to a competing service. Customers may purchase the streaming device together with the one-year subscription for $200. For customers who purchase the streaming device with the 1-year subscription, Main should allocate how much of the total contract price to the unlimited streaming access? Multiple choice question. $150 $125 $100 $120

120

Guarder Consulting enters into a contract with Smith Co. to restructure some of Smith's processes with a goal of cost savings. The contract states that Guarder will earn a fixed fee of $35,000 and earn an additional $10,000 bonus if Smith achieves $100,000 of cost savings. Guarder estimates a 55% chance that Smith will achieve $100,000 of cost savings. Assuming that Guarder determines the transaction price as the expected value of consideration, what transaction price will Guarder estimate for this contract?

40k

Rice Corp. recognizes revenue over time to account for long-term contracts and has the following information for the first year of the contract: Contract price $500,000 Total expected costs on contract 400,000 Costs incurred in current year 60,000 Costs incurred in previous years 0

75

Robbie Inc. estimated that it will receive $60,000 of consideration for providing services to Stan Company over a 6-month period. Robbie properly accrues $10,000 each month; after two months, Robbie estimates that the total consideration it will receive is only $50,000. For each of the remaining months, Robbie should recognize service revenue of:

8.3k

Which of the following methods of estimating progress toward completion represent output-type measures? (Select all that apply.)

Achievement of milestones Number of units produced or delivered Appraisal of performance completed to date

Orwell Inc. entered into a 6 month contract with a customer to provide consulting services that requires the customer to pay an upfront fixed fee of $15,000, plus the opportunity for Orwell to earn a bonus of $1,200 for achieving certain performance targets by the end of the 6 month period. Initially, Orwell estimated that it was probable that the bonus would be achieved and recorded a receivable. After one month, they determined they could no longer conclude that it is probable a significant reversal of revenue would not occur in the future related to the variable consideration. What should Orwell do? (Select all that apply.)

Adjust revenue for the previously recognized bonus For the remainder of the contract, only recognize revenue related to the fixed fee. Reverse the bonus receivable

Which of the following likely would be treated as a separate performance obligation related to the purchase of a pair of prescription eye glasses?

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

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

Balance sheet

Which of the following likely will lead to revenue recognition at a point in time? (Select all that apply.)

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

Related to long-term construction contracts, at the end of the period which accounts are netted?

Construction in progress and billings on construction contracts.

Why are estimated losses on an entire long-term project fully recognized in the first period the loss is anticipated?

Construction in progress would be valued at an amount greater than the company expects to realize from the contract.

Which of the following services are commonly performed over time? (Select all that apply.)

Consulting engagements Financial statement audits Lending of money

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?

Cost-to-cost ratio

What journal entry should be made to recognize accounts receivable for long-term construction projects?

Debit Accounts Receivable and Credit Billings on Construction Contract

What is the impact of a loss on long-term construction projects on the construction in progress account?

Decrease

What is the journal entry to recognize a loss on long-term contracts?

Dr: Cost of Construction; Cr: Revenue from Long-Term Contracts and Cr: Construction in Progress

Which methods may be used to estimate the stand-alone prices of goods and services? (Select all that apply.)

Expected cost plus margin approach Adjusted market assessment approach Residual approach

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

Franchisee

When is a loss recognized on a long-term contract?

In the first period in which the loss become evident.

The construction-in-progress account most closely relates to which type of account?

Inventory

Which of the following situations may make the contract price less apparent? (Select all that apply.)

Variable consideration provisions Sales with right of return Determining whether the seller is acting as principal or agent

Sales commission revenue is recognized by the

agent

Star Inc. licenses use of its intellectual property to customers. The benefit the customer receives from the license is not affected by Star's ongoing activity. Star should recognize revenue:

at the beginning of the license period

The seller's belief that it is probable that it will collect substantially all of the amount it is entitled to receive under the contract is referred to as the

collectibility threshold.

Goods or services that are not distinct are Blank______ and treated as (a) Blank______ performance obligation(s).

combined; single

If a contract qualifies for revenue recognition over time, revenue is recognized based on progress toward

completion

The billings on construction account is a contra account to

construction in progress.

From a financial reporting perspective the "sales returns" account is a:

contra-revenue

Commitment to performing an obligation and enforcing related rights represents a critical aspect of a(n)

contract

At the end of the period, if construction in progress is less than billings on construction contracts, it is recorded as a(n)

contract liability.

Multiple Choice Question A good or service is capable of being distinct only if the customer Multiple choice question. is planning to combine the good or service with goods or services acquired elsewhere is planning to use the good or service on its own could use the good or service on its own or in combination with goods or services acquired elsewhere

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

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.)

debit cash credit accounts receivable

Cash received from the sale of gift cards is recognized as

deferred revenue.

Multiple Choice Question The cost of a quality-assurance warranty is recognized Multiple choice question. when customers return the product for repair or replacement over the warranty period. during the period of sale.

during the period of sale.

Because the exact cost of a quality-assurance warranty is unknown when the related product is sold, the cost is

estimated and accrued during the year of sale.

When revenue is recognized over time in a long-term contract, a loss may have to be recognized in at least one period

even if the project as a whole is expected to be profitable.

Multiple Choice Question For estimating variable consideration, if there are several possible outcomes, the Blank______ method will tend to be most appropriate; if there are two possible outcomes, the Blank______ method will tend to be most appropriate Multiple choice question. most likely amount; expected value most likely amount; most likely amount expected value; most likely amount expected value; expected value

expected value; most likely amount

Multiple Choice Question Fuller contracted with the owners of "Healthy Bakeries" to open a bakery, sell its signature products and use its name and logo. This agreement refers to a Multiple choice question. trademark consignment franchise principle-agent agreement

franchise

A contract is said to have variable consideration if the price depends on the outcome of

future events

Answer Mode Multiple Choice QuestionYour Answer incorrect Estimated losses on the entire long-term project are recognized immediately because otherwise the CIP account would be valued at an amount Blank______ the amount the company expects to realize on the contract.

greater than

The construction in progress account represents the total construction costs (labor, material, overhead) and

gross profit recognized to date.

A seller properly recognizes an accounts receivable related to a contract if the seller:

has the unconditional right to receive payment

Which of the following situations may make the contract price less apparent? (Select all that apply.)

he time value of money Payment by the seller to the customer Variable consideration provisions

A seller estimates the stand-alone selling price of goods and services using the adjusted market assessment approach. Using this method, the seller will consider what it could sell the goods or services for in the market

in which it normally conducts business.

For a contract that qualifies for revenue recognition over time, revenue and cost of construction are reported in the

income statement.

Progress toward completion can be measured based on the proportion of effort expended thus far relative to the total effort expected to satisfy a performance obligation. This is referred to as a(n)

input method.

Licenses typically allow customers to use the seller's

intellectual

Which of the following can be used as indicators of progress toward completion under the input method? (Select all that apply.)

labor hours expended costs incurred machine hours used

Typical costs included in a construction project include

labor, materials, and overhead.

A contract is an agreement that creates enforceable rights and obligations.

legally

Estimates relating to long-term contracts

must be periodically updated.

Revenue recognized each period is determined by multiplying total estimated revenue by

percentage completed to date and subtracting revenue recognized in prior periods

When a performance obligation is satisfied over time, revenue is recognized in proportion to the amount of the

performance obligation that has been satisfied.

Berta Company owns inventory prior to a customer ordering it from Norman Company. If a customer returns the merchandise, Berta Company owns the returned inventory. Berta Company is a(n

principal

The collectibility criteria specifies that a contract only exists for the purpose of revenue recognition if the seller believes that it is

probable that it will collect the amount entitled to them under the contract

Variable consideration can only be recognized if it is

probable that the amount will be received in the future.

The amount of revenue that is recognized each period for a long-term contract that qualifies for revenue recognition over time is determined based on

progress toward completion.

A shortcoming of the output method for estimating progress toward completion is that it may

provide a distorted view of actual completion

Emil Company evaluates gift cards that it sold two years ago. Based on past experience, it is highly unlikely that gift cards outstanding for two years or longer will be redeemed. Related to these gift cards, Emil should

recognize revenue.

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

If the consignee can't find a buyer within an agreed upon time, the consignee

returns the goods to the consignor.

If based on past experience only a remote likelihood exists that a previously sold gift card will still be redeemed, the seller should recognize

rev

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

rev

It is important to distinguish between a principal and an agent because the principal recognizes revenue to the extent of the

sales price

THE BLANK selling price is the amount at which the good or service is sold separately under similar circumstance. (Enter one word per blan

stand-alone

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

stand-alone selling price.

The billings on construction account represents

the amount billed to customers to date.

On a long-term construction project, the amount in the construction in progress account represents the costs of construction plus the gross profit recognized to date, and the billings on construction represents

the amounts billed to the customer.

Revenue is recognized upon completion of a long-term contract if:

the contract does not qualify for revenue recognition over time

For bill-and-hold arrangements, revenue is typically recognized when

the related goods are delivered.

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

the related performance obligation is satisfied.

quality-assurance obligates the seller to make repairs or replace products that later are found to be defective or unsatisfactory.

warranty

Multiple Choice Question Options for additional goods or services are considered performance obligations if they provide a material right to the customer that the customer Multiple choice question. would receive otherwise. would not receive otherwise. did not expect when entering into the contract. expected when entering into the contract.

would not receive otherwise.

In a consignment, who retains the risks and rewards of ownership of the property?

Consignor

In which account is a loss from long-term contracts recorded?

Construction in progress

Which of the following must a seller recognize as separate line items on the balance sheet? (Select all that apply.)

Contract assets Accounts receivable Contract liabilities

Which of the following conditions must be met for goods or services to be distinct? (Select all that apply.)

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

Which of the following may provide evidence of possible reversals in the amount of variable consideration that will be received? (select all that apply)

a long delay before uncertainty resolves a history of changing payment terms on similar contracts a large number of possible outcomes that could occur

If Company A physically transfers goods to another company to sell on its behalf, but Company A retains title to the goods, this is referred to as a

consignment

The billings on construction contract account is classified as a(n)

contra asset.

At the end of a long-term construction project, the amounts in the construction in progress account will be Blank______ the billings on construction contract. Multiple choice question. equal to

equal to

Financial statement users can learn the amount of revenue reported by a company by reviewing its income statement and learn additional detailed revenue-related information by reviewing the company's

disclosure notes

For sales involving a right of return, the amount related to expected returns (Select all that apply.)

is recognized as a liability must be estimated

If a seller lacks sufficient information to be able to accurately estimate returns, the seller should recognize revenue only to the extent that

it is probable that significant future reversals in revenue will not occur.

A seller estimates the stand-alone selling price of goods and services using the residual approach. Using this method, the seller will estimate the stand-alone price by subtracting from the total contract price the:

known stand-alone prices of the other products or services

On January 5, Merkel Inc. purchases office equipment for its new branch office from Norbert Company. Merkel requests that the equipment be delivered after the renovation of the branch location is completed. On May 1, Merkel informs Norbert that it wishes delivery as soon as possible. The equipment is delivered on May 4. On what date should Norbert recognize the related revenue?

m4

For sales involving a right of return, the amount related to expected returns (Select all that apply.)

must be estimated is recognized as a liability

For sales involving a right of return, the amount related to expected returns (Select all that apply.)

must be estimated and accrued reduces the amount of revenue recognized on sales.

If a contract qualifies for revenue recognition over time, the income statement for each year reports related: (Select all that apply.)

ost of construction revenue

Revenue is typically recognized Blank______ for a license that provides the customer with the right of access to the seller's intellectual property.

over the license period

Xavier Inc. is adding two more floors to Tamara Company's existing office building. Revenue related to this service likely should be recognized

over time

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

over time.

Which of the following costs are included in a long-term construction contract? (Select all that apply.)

overhead direct labor direct material

Which of the following may provide evidence of possible reversals in the amount of the variable consideration that will be received? (Select all that apply.)

poor evidence on which estimates were based long delay until uncertainty is resolved estimates were based on factors beyond the seller's control

For a promise to provide a good or service to be accounted for as a separate performance obligation, the good or service must be

distinct from other goods and services in the contract.

Robbie Inc. estimated that it will receive $60,000 of consideration for providing services to Stan Company over a 6-month period. Robbie properly accrues $10,000 each month; after three months, Robbie estimates that the total consideration it will receive is only $25,000. When the estimate change is determined, the company should debit

service revenue; contract receivable; $17,500

Jones Company receives a prepayment from a customer consistent with a promise to deliver 20 new office printers to Smith Inc. The prepayment (Select all that apply.)

should be recorded as deferred revenue does not create a separate performance obligation

Options for additional goods or services that are treated as separate performance obligations require allocation of the contract price based on their estimated

stand-alone price.

True or False Question True or false: An extended warranty provides protection beyond the manufacturer's quality-assurance warranty. True false question.TrueFalse

t

Mueller Company sold merchandise costing $120,000 for $240,000. Mueller estimates that merchandise costing $5,000 will be returned for a refund of $10,000. Mueller should report net sales of:

230k

Guarder Consulting enters into a contract with Smith Co. to restructure some of Smith's processes with a goal of cost savings. The contract states that Guarder will earn a fixed fee of $35,000 and earn an additional $10,000 bonus if Smith achieves $100,000 of cost savings. Guarder estimates a 55% chance that Smith will achieve $100,000 of cost savings. Assuming that Guarder determines the transaction price as the most likely amount, what transaction price will Guarder estimate for this contract?

45k

Margery sells 100 TV top boxes to customers for $90 each. Margery estimates that 6% of the units will be returned for a full refund. Margery should debit sales returns for:

540

On January 1st, Guarder Consulting enters into a one-year contract with Smith Co. to restructure some of Smith's processes with a goal of cost savings. Smith pays Guarder an up-front fixed fee of $48,000 on January 1st. Guarder will also earn an additional $12,000 bonus if Smith achieves $100,000 of cost savings. Guarder estimates a 70% chance that Smith will achieve $100,000 of cost savings. Assuming that Guarder determines the transaction price as the most likely amount, what amount of revenue will be recorded at the end of the first month?

5k

Main Company sells a video streaming device for $100. A one-year subscription to unlimited video streaming costs $150. Alternatively, customers can rent videos on demand or subscribe to a competing service. Customers may purchase the streaming device together with the one-year subscription for $200. For customers who purchase the streaming device with the 1-year subscription, Main should allocate how much of the total contract price to the streaming device?

80

Margery sells 100 TV top boxes to customers for $90 each. Margery estimates that 6% of the units will be returned for a full refund. Margery should report net sales revenue of:

8460

A seller estimates the stand-alone selling price of a good using the adjusted market assessment approach. Using this method, the seller may refer to which of the following?

A competitor's selling price

When should the initial franchise fee be recognized by the franchisor?

After substantial performance of the initial services by the franchisor.

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

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

Which of the following conditions will cause revenue to be recognized over time? (Select all that apply.)

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

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

What is the journal entry to recognize gross profit when revenue is recognized upon completion of a long-term construction project?

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

On January 1st, Guarder Consulting enters into a one-year contract with Smith Co. to restructure some of Smith's processes with a goal of cost savings. Smith pays Guarder an up-front fixed fee of $48,000 on January 1st. Guarder will also earn an additional $12,000 bonus if Smith achieves $100,000 of cost savings. Guarder estimates a 70% chance that Smith will achieve $100,000 of cost savings. What journal entry will Guarder make on January 1st to recognize the up-front cash payment?

Debit cash $48,000, credit deferred revenue $48,000

Margery sells 100 TV top boxes to customers for $90 each and credited sales revenue for $9,000. Margery estimates that six of the units will be returned for a full refund of $540. What additional journal entry should Margery make?

Debit sales returns and credit refund liability

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

Which of the following methods are appropriate for estimating variable consideration? (Select all that apply.)

Expected value Most likely amount that will be received

Multiple Choice Question The first step used to apply the core revenue recognition principle is: Multiple choice question. Determine the transaction price Identify the contract with a customer Identify the performance obligation(s) in the contract

Identify the contract with a customer

The first step used to apply the core revenue recognition principle is:

Identify the contract with a customer

Which of the following costs must be excluded from the calculation of the cost-to-cost ratio? (Select all that apply.)

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

Virginia Corp. recognized deferred revenue for cash received on a multi-year contract that also provides for variable consideration (bonus) if certain targets are met by the end of the contract period. Which of the following statements are true if Virginia Corp revises its estimate of variable consideration in subsequent years?

It must reflect the adjustment in that year's revenue.

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

Licenses

Which of the following methods are appropriate for estimating variable consideration? (Select all that apply.)

Most likely amount that will be received Expected value

What method(s) can be used to estimate progress toward completion for the purpose of recognizing revenue over time? (Select all that apply.)

Output method Input method

When should ongoing franchise fees be recognized by the franchisor?

Over time in the periods the services are performed by the franchisor.

Multiple Choice Question Promises to transfer goods or services to customers are referred to as Multiple choice question. Revenue obligations Performance obligations Business obligations Contractual promises

Performance obligations

Which method provides a better measure of a company's economic activity each period?

Revenue recognition over time

Koster Inc. recognized $10,000 of service revenue, which represents one-half of the estimated bonus it expects to receive at the end of the year. On October 1, Koster re-assesses the situation and is unable to conclude that it is probable it will meet the conditions for receiving the bonus. What should Koster do?

Reverse the already recognized revenue on October 1

Place the five steps used to apply the core revenue recognition principle into the correct order.

Step 1: Identify the Contract with a Customer The application of this step will be straightforward the majority of the time. ... Step 2: Identify the Performance Obligations ... Step 3: Determine the Transaction Price ... Step 4: Allocate the Transaction Price to the Performance Obligations ... Step 5: Recognize Revenue When or As Performance Obligations Are Satisfied ...

Multiple Choice Question Peter Inc. recognized deferred revenue for variable consideration under a multi-year contract. Which of the following correctly describes the requirement in subsequent years related to the estimated variable consideration? Multiple choice question. The estimate must be reassessed each period The deferred amount remains unchanged until recognized as revenue It is only necessary to reassess the estimate if the company is losing money on the contract

The estimate must be reassessed each period

Neither the seller nor the customer have performed any obligation under a written agreement. What additional condition would disqualify this as a contract for purposes of revenue recognition?

The seller and buyer can terminate the agreement without a penalty.

When consigned goods are sold, the consignee remits what amount to the consignor?

The selling price less commissions and expenses

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

The timing of recognition

What is the difference between journal entries to recognize gross profits when revenue is recognized over time and when revenue is recognized upon completion of a long-term project?

Timing

Which of the following will not differ between revenue recognized over time and revenue recognized at completion? (Select all that apply.)

Total expense Total revenue Total profit

For a consignment sale, when is inventory reduced for the cost of the item by the consignor?

When sold by the consignee.

The construction in progress account is equivalent to which account in a manufacturing environment?

Work-in-process

Revenue recognition standards help ensure that the appropriate Blank______ of revenue appears in each Blank______ financial statement.

amount; period's

Because extended warranties usually are priced and sold separately from the related product, they (Select all that apply.)

are considered separate performance obligations can be viewed as separate transactions

For licenses of functional intellectual property, revenue is typically recognized

at the start of the license period.

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

be entitled to receive

On January 5, Merkel Inc. purchases office equipment for its new branch office from Norbert Company. Merkel requests that the equipment be delivered after the renovation of the branch location is completed. This agreement is referred as a:

bill-and-hold arrangement

In a bill-and-hold arrangement, the Blank______ requests that the Blank______ ship the products Blank______. Multiple choice question. seller; buyer; immediately

buyer; seller; at a later date

If delivery and payment related to the sale of goods occur relatively near each other, the time value of money

can be ignored.

The closing entry for a long-term construction project when revenue is recognized either over time or upon completion includes which of the following? (Select all that apply.)

credit construction in progress debit billings on construction contract

When revenue related to a long-term construction contract is recognized over time, the journal entry to recognize revenue includes which of the following? (Select all that apply.)

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

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.)

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

When a construction contract is closed upon completion of a construction project, the journal entry will include which of the following? (Select all that apply.)

debit to billings on construction contract. credit to construction in progress.

Prepayments by customers for future goods or services should initially be recorded as

deferred revenue.

Multiple Select Question Select all that apply A license for symbolic intellectual property (Select all that apply.) Multiple select question. provides the customer with the right of access to the intellectual property does not have significant standalone functionality does have significant standalone functionality provides the customer with the right of use of the intellectual property

provides the customer with the right of access to the intellectual property does not have significant standalone functionality

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

residual

Multiple Choice Question If the consignee can't find a buyer within an agreed upon time, the consignee Multiple choice question. may keep the goods. returns the goods to the consignor. must purchase the goods.

returns the goods to the consignor.

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

rev

______ accounting standards help ensure that the appropriate amount of revenue appears in each period's income statement.

rev recognition

The formula: total estimated revenue times percentage completed to date less revenue recognized in prior periods is used to measure:

revenue recognized for the current period

The potential that a good does not satisfy the original performance obligation is addressed through a customer's:

right of return

A seller estimates the stand-alone selling price of goods using the expected cost plus margin approach. Using this method, the seller combines which two components?

the cost of satisfying the performance obligation an appropriate profit margin

A seller properly recognizes an accounts receivable related to a contract if the seller: (Select all that apply.)

the only remaining requirement is the passage of time. has the unconditional right to receive payment

A long-term contract that includes many products and services that are capable of being distinct, may be accounted for as a single performance obligation because

the seller's role is to combine those products and services prior to delivery or completion.

Knights Inc. is selling a new product and is unable to estimate reliably the amount of future returns. Knights Inc. may want to postpone revenue recognition until

the uncertainty about returns is resolved.

Common note disclosures relating to revenue include: (Select all that apply.) Multiple select question. timing of recognition projected future revenue major product lines outstanding performance obligations

timing of recognition major product lines outstanding performance obligations

The journal entries used to recognize the costs of long-term construction contracts are identical when revenue is recognized upon completion and when it is recognized over time; however the two methods differ with respect

to the timing of revenue recognition.

Which of the following are often provided by the franchisor at start-up of a new franchise? (Select those that apply at start-up)

training of franchisee's employees remodeling of franchisee's facilities

Gerhard Inc. sells merchandise to a customer with a long payment period. Gerhard determines that the time value of money related to this transaction is significant. Gerhard should allocate the

transaction price between the merchandise cash price and the financing component.

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

transferred to customers

When revenue is recognized upon completion of a long-term contract, CIP is updated to include gross profit

upon completion.

Options for additional goods or services that are treated as separate performance obligations

vrequire allocation of the contract price

The essential difference between revenue recognition over time and upon completion relates to the

✓ pattern of recognition of the related gross profit.