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Exam 5: Income Measurement

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Question 51

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Revenue always is recognized once the buyer has physical possession of goods.

A) True
B) False

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Question 52

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Prepare Veras' January 31 journal entry to account for the revenue earned from January 1 - January 31.

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In January,Veras estimates a greater tha...

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Question 53

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In 2017,JRE2 would report (rounded to the nearest thousand) gross profit (loss) of:

Bert's Meat Market sells quarters and sides of beef on the installment basis.Losses on receivables are very difficult to predict,and meat products cannot be repossessed.The revenue recognition method used by Bert would be:

When using the cost recovery method of accounting for long-term construction contracts under IFRS,early in the life of the contract it is typically the case that:

Estimate the stand-alone selling price of the software using the residual approach.

Revenue is not recognized under the realization principle unless the earnings process is complete or virtually complete and there is reasonable certainty about the expected collection of the asset received.

On February 12,2016,Mohawk Home and Garden enters into contract with a local business to provide weekly grass-cutting services between May and September of that year,and receives $2,000 in advance.As part of a local business promotion,Mohawk offers a 50% discount on any barbecue grill with a list price in excess of $200.In the past,Mohawk charged the same amount ($2,000)for the same weekly grass-cutting service,but without the grill discount coupon.Based on historical experience with other clients,Mohawk estimates that about 40% of the coupons will be redeemed,purchasing grills with an average total list price of $400. Required: (a)How many performance obligations are in this contract? Explain the reasons for your answer. (b)Prepare the journal entry to account for the transaction as of February 12,2016,clearly identifying the revenue or deferred revenue associated with each performance obligation.

Sullivan should recognize revenue for the two parts of the arrangement as follows:

Assume Sanjeev estimates variable consideration as the expected value.What is the amount of revenue Sanjeev would recognize for the first month of the contract?

Assuming that the initial services to be performed by Flapper Jack's subsequent to the signing are substantial and that collection of the receivable is reasonably assured,the journal entry required at signing would include a credit to:

At December 31,2017,Rigsby would report in its balance sheet:

Use the following to answer questions Beavis Construction Company was the low bidder on a construction project to build an earthen dam for $1,800,000.The project was begun in 2015 and completed in 2016.Cost and other data are presented below: -Assume that Beavis recognizes revenue on this contract over time according to percentage of completion.Required: Compute the amount of gross profit recognized during 2015 and 2016.

Which of the following is not true?

A contract exists for purposes of revenue recognition if either the seller or customer has performed an obligation specified by the contract.

Prepare the journal entry to recognize the sale of a new membership.Clearly identify revenue or deferred revenue associated with each performance obligation.

Use the following to answer questions The following table presents a summary of ratio analysis for Uncle Joe's Coffee,based on the most recent 12 months and five-year comparisons of Uncle Joe's with averages in the restaurant industry and the services sector,respectively. -Using the information provided above,briefly summarize the operating performance of Uncle Joe's relative to its benchmark competitors.

Assume that at the time of signing the contract,collection of the receivable was assured and that service obligations were substantial.However,by October 20,2015,substantially all continuing obligations had been met.The journal entry required at October 20,2015 would include a:

Which of the following is not true about contract assets?

Lexikon Pianos sells customized concert pianos throughout the U.S.Its grand concert piano sells for $200,000,which includes delivery and installation.The product comes with a two-year warranty that covers any product defects,and customers can choose to add an extended three-year warranty for maintenance and repair at a price of $2,000.Customers also get an option to upgrade traditional plastic keys to bone ones for an additional $20,000.The extended warranty would normally sell for $3,500,and the installation of bone keys carries a standalone price of $30,000. Required: (a)Given the information above,how many performance obligations exist in the contract to purchase a grand concert piano? (b)Now,assume that the standalone price of the extended warranty is $2,000,and that of the bone key upgrade is $20,000.How many performance obligations exist in the contract to purchase a grand concert piano?