9-Basic-Wiley

Question 1

When is revenue recognized in Cost Recovery Method?

Answer 1

Revenue(gross profit)is recognized when the cumulative receipts(Principal + interest) exceed the cost of goods(assets) sold.

Question 2

When is the revenue(gross profit) recognized in Installment Sale Method?

Answer 2

It is recognized after sale, in proportion to cash collected for the period

Question 3

Which methods can be used for recording Real Estate transactions?

Answer 3

1. Deposit
2. Installment method
3. Cost Recovery
4. Reduced Profit
5. Percentage of completion
6. Full Accrual

Question 4

What is deposit method of recording real estate transaction?

Answer 4

The payments received are recorded as a liability unless the contract is cancelled or a sale is achieved.

Question 5

Whats is reduced profit method of recording real estate transactions?

Answer 5

The seller recognizes a portion of profit at the time of the sale with the remaining portion recognized in future periods.

The reduced profit = Gross profit -PV of future receivable -

Question 6

Which all conditions should be met for Software products that DO NOT require significant production, modification or customization should recognize revenue?

Answer 6

1. Persuasive evidence of an agreement exists
2. Delivery has occurred
3. Vendor’s fee is fixed or determinable
4. Collectibility is probable

Question 7

?What is an operating cycle?

Answer 7

The average time between acquisition of materials and final cash realization.