Question 1

A sales discount of 2/10 means the seller will receive 98% of the selling price.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following would indicate high quality earnings for a company?

Accepted Answer

A)   Increasing revenue while cash from operations is stable.
B)   Increasing net income while cash from operations decreases.
C)   Revenue and net income that move together.
D)   Net income and cash flow from operations that move together.E) A) and B)
F) B) and C)

Question 3

Companies offering sales discounts must adjust the original amount of the sales revenue.

Accepted Answer

A) True 
 B)False

Question 4

Use the following information for questions 57-58.
Dinca Construction Co. agreed to build a bridge for Gotham City. The contract specifies that construction will take three years and Dinca will receive $12,500,000. The company expects annual costs to be $3,500,000; $2,750,000; and $1,800,000.
-Assume Dinca uses the percentage of completion method. Profits for year one will be

Accepted Answer

A)   $0.
B)   $1,483,333.
C)   $1,934,783.
D)   $4,450,000.E) B) and D)
F) B) and C)

Question 5

Bundling is a term used when companies sell both a product and a service.

Accepted Answer

A) True 
 B)False

Question 6

Financial statement users can find information about a company's revenue recognition policies in the notes to the financial statements.

Accepted Answer

A) True 
 B)False

Question 7

Revenue may be recognized during production in which of the following types of business?

Accepted Answer

A)   retail sales
B)   manufacturing for mass-production
C)   construction
D)   franchise operationsE) B) and D)
F) None of the above

Question 8

The earnings per share figure expresses net income, after deducting common dividends, on a per-share basis.

Accepted Answer

A) True 
 B)False

Question 9

The difference between sales revenue and cost of goods sold is

Accepted Answer

A)   sales revenue.
B)   gross profit.
C)   operating income.
D)   net income.E) A) and B)
F) A) and C)

Question 10

When a company reports net income, financial statement users see this as a sign that

Accepted Answer

A)   the company is viable.
B)   the company has the ability to sustain itself.
C)   the company has the ability to declare dividends.
D)   all of the above.E) A) and B)
F) None of the above

Question 11

The difference between gross profit and the company's operating expenses is

Accepted Answer

A)   sales revenue.
B)   gross profit.
C)   operating income.
D)   net income.E) A) and C)
F) B) and D)

Question 12

Duro Brothers Ltd. is a construction company located in Toronto. The company is responsible for several large building complexes currently being constructed in the Toronto area. Total revenue and costs can be readily estimated and each contract is expected to take several years to complete. How is Duro most likely to recognize revenue?

Accepted Answer

A)   percentage of completion method
B)   equally over the term of the contract
C)   at the time of contract signing
D)   all revenue at the end of the jobE) A) and B)
F) A) and C)

Question 13

When revenue is earned from the provision of services, all of the following are necessary for revenue recognition EXCEPT

Accepted Answer

A)   economic benefits from the transaction will flow to the seller.
B)   the amount of revenue can be reliably measured.
C)   the costs incurred to complete the transaction can be reliably measured.
D)   the seller has no continuing involvement.E) None of the above
F) A) and B)

Question 14

All of the following criteria must be satisfied in order to recognize revenue for the sales of goods EXCEPT

Accepted Answer

A)   the portion of total services can be reliably measured.
B)   significant risks and rewards have been transferred to the buyer.
C)   the seller has no continuing involvement.
D)   the amount of revenue can be reliably measured.E) B) and D)
F) B) and C)

Question 15

The amount of revenue is one of the most significant amounts reported in the financial statements.

Accepted Answer

A) True 
 B)False

Question 16

All of the following statements are true EXCEPT

Accepted Answer

A)   a company that has multiple lines of business must consistently apply one revenue recognition policy for all types of revenue.
B)   a company that has multiple lines of business can use different methods of revenue recognition for different products.
C)   a company that has multiple lines of business must tell users what policies they are using so that that they can make informed decisions.
D)   A company that has multiple lines of business must choose revenue recognition policies that are appropriate for their revenue streams.E) A) and B)
F) B) and D)

Question 17

All of the following categories have established revenue recognition criteria EXCEPT

Accepted Answer

A)   sales of goods.
B)   collection of accounts receivable.
C)   provision of services.
D)   receipt of interest, royalties, and dividends.E) A) and D)
F) All of the above

Question 18

If a $6,750 sale is made on December 30 with terms of 2/10, net 30 and collection is made on January 31, the amount collected is

Accepted Answer

A)   $5,400.
B)   $6,615.
C)   $6,750.
D)   $6,885.E) All of the above
F) B) and C)

Question 19

A company may choose numerous methods of recognizing revenue for different revenue types.

Accepted Answer

A) True 
 B)False

Question 20

Revenue should be measured at the cost of the consideration received or receivable.

Accepted Answer

A) True 
 B)False

Exam 4: Revenue Recognition and the Statement of Incom

If a $6,750 sale is made on December 30 with terms of 2/10, net 30 and collection is made on January 31, the amount collected is

Correct Answer
verified

The amount of revenue is one of the most significant amounts reported in the financial statements.

Correct Answer
verified

A company may choose numerous methods of recognizing revenue for different revenue types.

Correct Answer
verified

All of the following statements are true EXCEPT

Correct Answer
verified

Companies offering sales discounts must adjust the original amount of the sales revenue.

Correct Answer
verified

When a company reports net income, financial statement users see this as a sign that

Correct Answer
verified

A sales discount of 2/10 means the seller will receive 98% of the selling price.

Correct Answer
verified

Financial statement users can find information about a company's revenue recognition policies in the notes to the financial statements.

Correct Answer
verified

When revenue is earned from the provision of services, all of the following are necessary for revenue recognition EXCEPT

Correct Answer
verified

Correct Answer
verified

The difference between gross profit and the company's operating expenses is

Correct Answer
verified

The earnings per share figure expresses net income, after deducting common dividends, on a per-share basis.

Correct Answer
verified

The difference between sales revenue and cost of goods sold is

Correct Answer
verified

All of the following criteria must be satisfied in order to recognize revenue for the sales of goods EXCEPT

Correct Answer
verified

Correct Answer
verified

Bundling is a term used when companies sell both a product and a service.

Correct Answer
verified

Which of the following would indicate high quality earnings for a company?

Correct Answer
verified

All of the following categories have established revenue recognition criteria EXCEPT

Correct Answer
verified

Revenue may be recognized during production in which of the following types of business?

Correct Answer
verified

Revenue should be measured at the cost of the consideration received or receivable.

Correct Answer
verified

Exam 4: Revenue Recognition and the Statement of Incom

If a $6,750 sale is made on December 30 with terms of 2/10, net 30 and collection is made on January 31, the amount collected is

Correct AnswerverifiedShow Answer

The amount of revenue is one of the most significant amounts reported in the financial statements.

Correct AnswerverifiedShow Answer

A company may choose numerous methods of recognizing revenue for different revenue types.

Correct AnswerverifiedShow Answer

All of the following statements are true EXCEPT

Correct AnswerverifiedShow Answer

Companies offering sales discounts must adjust the original amount of the sales revenue.

Correct AnswerverifiedShow Answer

When a company reports net income, financial statement users see this as a sign that

Correct AnswerverifiedShow Answer

A sales discount of 2/10 means the seller will receive 98% of the selling price.

Correct AnswerverifiedShow Answer

Financial statement users can find information about a company's revenue recognition policies in the notes to the financial statements.

Correct AnswerverifiedShow Answer

When revenue is earned from the provision of services, all of the following are necessary for revenue recognition EXCEPT

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The difference between gross profit and the company's operating expenses is

Correct AnswerverifiedShow Answer

The earnings per share figure expresses net income, after deducting common dividends, on a per-share basis.

Correct AnswerverifiedShow Answer

The difference between sales revenue and cost of goods sold is

Correct AnswerverifiedShow Answer

All of the following criteria must be satisfied in order to recognize revenue for the sales of goods EXCEPT

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Bundling is a term used when companies sell both a product and a service.

Correct AnswerverifiedShow Answer

Which of the following would indicate high quality earnings for a company?

Correct AnswerverifiedShow Answer

All of the following categories have established revenue recognition criteria EXCEPT

Correct AnswerverifiedShow Answer

Revenue may be recognized during production in which of the following types of business?

Correct AnswerverifiedShow Answer

Revenue should be measured at the cost of the consideration received or receivable.

Correct AnswerverifiedShow Answer

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