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100
Under the percentage-of-completion method, amounts billed and the cash actually received affect income recognition.
What is FALSE?
100
Over the life of a particular account receivable, the same total amount of gross profit is recognized under the installment method and the cost recovery method.
What is TRUE?
100
Revenue from the sale of computer software is always recognized at the point of sale.
What is FALSE?
100
Use of the installment sales method requires that firms track the gross profit percentage associated with a particular sale.
What is TRUE?
100
The first disclosure note to the financial statements is typically the summary of significant accounting policies.
What is TRUE?
200
Revenue on a multiple-element contract typically is allocated to independent parts of the contract based on their relative selling prices.
What is TRUE?
200
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.
What is TRUE?
200
Which of the following is not an indicator that the seller is a principal with respect to a transaction? A) The seller is primarily responsible for providing the product or service to the customer. B) The seller's primary role is facilitating the sale of the product or service. C) The seller owns inventory prior to a customer ordering it and after a customer returns it. D) The seller has discretion in setting prices and identifying suppliers.
What is B?
200
If the seller is a principal, the agent has primary responsibility for delivering a product or service.
What is FALSE?
200
When the right of return exists, revenue can be recognized at the point of sale if the seller can make reliable estimates of future returns.
What is TRUE?
300
If the seller is a principal, the seller typically is not vulnerable to risks associated with delivering the product or service.
What is FALSE?
300
Merchandise sold FOB shipping point indicates that: The buyer holds title after the merchandise leaves the seller's location.
What is TRUE?
300
When the expected collection of accounts receivable is difficult to estimate, companies must use the cost recovery method.
What is FALSE?
300
Recognition of franchise fee revenue is dependent on judgments of both substantial performance and expected collection of fees.
What is TRUE?
300
Initial franchise fees are always recognized on the date they are received.
What is FALSE?
400
A decrease in the receivables turnover ratio indicates a decrease in the time between credit sales and cash collection.
What is FALSE?
400
When accounting for multiple-element arrangements, GAAP indicates that sellers can separately record revenue for part of an arrangement even if the part does not have value to the customer on a stand-alone basis.
What is FALSE?
400
When using the percentage-of-completion method of accounting for long-term contracts, the percentage of completion used to recognize gross profit in the first year usually is determined by measuring: A) Costs incurred in the first year, divided by estimated remaining costs to complete the project. B) Costs incurred in first year, divided by estimated total costs of the completed project. C) Costs incurred in first year, divided by estimated gross profit. D) None of the other answers is correct.
What is B?
400
Boomerang Computer Company sells computers with an unconditional right to return the computer if the customer is not satisfied. Boomerang has a long history selling these computers under this returns policy and can provide precise estimates of the amount of returns associated with each sale. Boomerang most likely should recognize revenue: A) When Boomerang delivers a computer to a customer. B) When Boomerang receives cash from the customer. C) When a customer returns a computer. D) Never, because the right of return is unconditional.
What is A?
400
A company could improve its return on assets by increasing its income or by increasing its total assets.
What is FALSE?
500
Slick's Used Cars sells pre-owned cars on the installment basis and carries its own notes because its customers typically cannot qualify for a bank loan. Default rates tend to be high or unpredictable. However, in the event of nonpayment, Slick's can usually repossess the cars without loss. The revenue method Slick would use is the: A) Installment sales method. B) Point of sales method. C) Cost recovery method. D) Installment sales method or cost recovery method.
What is D?
500
GAAP that covers revenue recognition for multiple-part arrangements requires that a seller recognize revenue for a particular part if: A) The part has value on a stand-alone basis. B) Customer acceptance of the part is not contingent on successful delivery of a later part. C) The part constitutes at least a "preponderance of the fair value" of the total arrangement. D) Both the part has value on stand-alone basis and customer acceptance of the part is not contingent on successful delivery of a later part are required.
What is D?
500
. A company is effectively leveraging when The return on shareholders' equity exceeds the return on assets.
What is TRUE?
500
For a typical manufacturing company, the most common critical point for recognizing revenue is the date: A) An order is received. B) Production is completed. C) The product is delivered. D)Payment is received.
What is C?
500
Assume that Steffi signed a $50,000 installment note when she signed the franchise agreement. RS can recognize revenue associated with the $50,000: A) When Steffi signs the agreement, so long as RS has sufficient experience with similar arrangements to estimate un-collectible accounts. B) As soon as RS has assisted Steffi in setting up the store, so long as RS has sufficient experience with similar arrangements to estimate un-collectible accounts. C) Gradually as RS provides advertising and administration services. D) When RS receives installment payments from Steffi, so long as RS has sufficient experience with similar arrangements to estimate un-collectible accounts. Substantial performance has occurred and can estimate bad debts.
What is B?