FAR 1_03

  1. On Jan 1 CoA sells equipment to CoB. CoB pays for it on July 1. The equip is delivered on Aug 1. What are the journal entry accts for CoA?
    • 7/1
    • [DR] Cash
    • [CR] Unearned Sales Revenue
    • 8/1
    • [DR] Unearned Sales Revenue
    • [CR} Sales Revenue
    • [DR] COGS
    • [CR] Inventory
  2. What are the five steps in applying the revenue recognition standard?
    • Identify the contract with the customer
    • Identify the separate performance obligations in the contract
    • Determine the transaction price
    • Allocate the transaction price to the separate obligations
    • Recognize revenue when each obligation is satisfied
  3. True / False: A contract only exists when put into writing.
    • False
    • Oral agreements are also contracts
  4. What criteria must be met for a good or service to be considered distinct and identifiable? When is it not separate?
    • The item can be separately identified from the other items in the contract
    • The customer can benefit from the item independently or when combined with the customer’s available resources (NOT integrated with other goods or services in the contract)
    • NOT SEPARATE
    • When the entity must integrate the item with other goods or services in the contract, then these items are considered a bundle.
  5. A CustomerA purchases a couch but doesn’t have to pay for the couch for 3 years (3 years interest free financing). At what amount should the furniture store recognize the sale?
    Present Value (PV) of the cost of the item.
  6. How is the cost allocated in a contract where the total selling price is less than the sum total of the individual items?
    Allocate based on proportion to the stand-alone selling prices.
  7. What is an Output Method of recognizing revenue?
    Based on units or services delivered to the client; what the client receives.
  8. What is an Input Method of recognizing revenue?
    • Based on what is used by the entity to create the item or service.
    • Example = hours used by a CPA or law firm on a client’s project
  9. When can revenue be recognized Over Time?
    • If any one of the following exist.
    • The entity’s performance creates or enhances an asset that the customer controls
    • The customer consumes the benefit as the entity performs it (such as monthly cleaning contract)
    • The entity’s performance does not create an asset with alternative use to the entity, and the entity has an enforceable right to receive payment for performance completed to date.
Author
BethM
ID
337874
Card Set
FAR 1_03
Description
Becker Review 2018
Updated