The revenue recognition principle states that revenue is recognized when it is
B. realized and earned
Revenue from selling products is generally recognized
D. at the point of sale
When a seller is exposed to continued risks of ownership through return of the product, the seller should recognize revenue
B. at the time of sale only if 6 specific conditions are met
The accounting profession requires the percentage of completion method be used when
C. all of the options must exist.
The completed contract method should be used only when
D. all of the options are correct.
A very popular measure used to determine the progress toward completion under the percentage of completion method is the
A. cost to cost method
The billings on construction in process account is reported as
A. either a current asset or current liability
Under the completed contract method, which of the following are recorded each period during construction?
A. costs
A loss on an unprofitable long term contract is recognized in the current period under
C. both the completed contract and the percentage of completion method
A loss in the current period on a contract expected to be profitable upon completion is recognized in the current period under
B. the percentage of completion method only
Which of the following is deferred to future periods under the installment sales method?
D. gross profit
The loss(gain) on repossession of merchandise is the difference between the estimated fair value of the merchandise and
C. unrecovered cost of the merchandise
Deferred gross profit on installment sales is generally classified as a (an)
D. current liability
No profit is recognized until cash receipts exceed the seller's cost of the merchandise under the
B. cost recovery method
Under the cost recovery method, which of the following is reported in the period of sale?
D. both sales and cost of goods sold
The revenue recognition principle states that revenue is recognized when it is earned and realized or realizable.
True
Revenue recognition only occurs at the point of sale.
False
Trading loading and channel stuffing are used to overstate revenues and window dress the financial statements.
true
Under the percentage of completion method, revenue is recognized before construction is completed.
true
Under the installment sales method, gross profit is recognized in the periods that cash is received, rather than in the period of sale.
true
The completed contract method recognizes revenues, costs, and gross profit as a company makes progress toward completion on a long term contract.
false
A loss on an unprofitable contract must be recognized in full in the current period unde the completed contract method.
true
In consignment sales, the consignor uses a modified version of the sale basis of revenue recognition.
true
Companies commonly recognize revenues from manufacturing and selling activities at point of sale (usually meaning delivery).
true
Under the completed-contract method, a company accumulates construction costs plus gross profit earned to date in the construction in process inventory account
false
Which of the following transactions results in the recognition of revenue?
D. all of the above
Revenue earned from permitting others to use enterprise assets is recognized:
B. As time passes
Which method recognizes revenues and gross profit eah period based upon the progress of construction?
A. percentage of completion
When a loss occurs in the current period on a profitable long-term contract, the loss is:
B. recognized under the percentage of completion method
Under the completion of production basis, revenue is recognized it:
D. all of the above
The installment sales method is acceptable when:
B. there is no reasonable basis for estimating the collectiblility of
the sale
Deferred gross profit on installment sales is reported on the financial statements as:
D. a current liability on the balance sheet
Repossessed merchandise on an installment sale should be recorded at:
B. fair market value
Under the cost recovery method, profit is recognized only when:
B. cash payments received exceed the cost of goods sold
Under the deposit method:
B. cash is received before the sales transaction is completed
The revenue recogniztion principle provides that revenue is recognized when
B. it is realized or realizable and it is earned
When goods or services are exchanged for cash or claims to cash (receivables), revenues are
D. realized
When the entity has substantially accomplished what it must do to be entitled to the beneifits represented by the reveues, reveunes are
B. earned
An alternative available when the seller is exposed to continued risks of ownership through return of the product is
C. all of these
A sale should not be recognized as revenue by the seller at the time of sale if
D. the buyer has a right to return the product and the amount of future
returns cannot be reasonably estimated
The FASB concluded that if a company sells its product but gives the buyer the right to return the product, revenue from the sales transaction shall be recognized at the time of sale only if all of 6 conditions have been meet. Which of the following is not one of these 6 conditions?
A. the buyer is obligated to pay the seller upon resale of the product
In selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be
A. the degree to which a reliable estimate of the costs to complete and
extent of progress toward completion is practicable
When work to be done and costs to be incurred on a long-term contract can be estimated dependably, which of the following methods of revenue recognition is preferable?
B. percentage of completion method
How should the balances of progress billings and construction in process be shown at reporting dates prior to the completion of a long-term contract?
B. net, as a current asset if debit balance, and current liability if
credit balance
In accounting for a long-term construction type contract using the percentage of completion method, the gross profit recognized during the first year would be the estimated total gross profit from the contract, multiplied by the percentage of the cots incurred during the year ot the
A. total estimated cost
How should earned but unbilled revenues at the balance sheet date on a long-term construction contract be disclosed if the percentae of completion method of revenue recognition is used
C. as construction in process in the current asset section of the
balance sheet
The principal disadvantage of using the percentage of completion method of recognizing revenue from long term contracts is that it
D. gives results based upon estimates which may be subject to
considerable uncertainty
The principal advantage of the completed contract method is that
A. reported revenue is based on final results rather than estimates of
unperformed work
Under the completed contract method
B. revenue, cost and gross profit are recognized at the time the
contract is completed
Cost estimates on a long term contract may indicate that a loss will result on completion of the entire contract. In this case, the entire expected loss should be
B. recognized in the current period, regardless of whether the
percentage of completion or completed contract method is employed
Deferred gross profit on installment sales is generally treated as a(n)
B. unearned revenue and classified as a current liability
The installment sales method of recognizing profit for accounting purpose is acceptable if
C. collection of the sales price is not reasonable assured
Under the installment sales method
C. gross profit is deferred proportionate to cash uncollected from sale
of the product, but total revenues and costs are recognized at the point
of sale
Revenue is recognized by the consignor when the
D. consignor receives an account sales from the consignee
