Chapter 6

Question 1

Revenues

Answer 1

inflows or other enhancements of assets of an entity or settlements of its liabilities

Question 2

critical aspect of financial reporting is

Answer 2

measuring and reporting revenue

Question 3

5 steps to recognizing revenue

Answer 3

identify the contract, identify the performance obligations, determine the transaction price, allocate the transaction price, recognize revenue when (or as) each performance obligation is satisfied.

Question 4

Step 1 in recognizing revenue

Answer 4

Identify the contract

Question 5

step 2 to recognize revenue

Answer 5

Identify the performance obligations

Question 6

step 3 to recognize revenue

Answer 6

determine the transaction price

Question 7

Step 4 to recognize revenue

Answer 7

Allocate the transaction price

Question 8

Step 5 to recognize revenue

Answer 8

Recognize revenue when (or as) each performance obligation is satisfied

Question 9

customer is more likely to control a good or service if the customer has:

Answer 9

-Obligation to pay
-Legal title to the asset
-Physical possession
-Assumed risk/rewards
-Accepted the asset

Question 9

output based estimate

Answer 9

Measured as the portion of the goods or services transferred to date

Question 9

Revenue is recognized over a period of time if these three criteria are met

Answer 9

-Customer consumes the benefit
-Customer controls the asset as its created
-Asset has no alternative use.

Question 9

What steps are used for contracts with multiple performance organizations

Answer 9

2 and 4

Question 9

If performance obligation doesn’t meet 3 criteria than

Answer 9

recognize revenue at the point in time when obligation has been complete.

Question 10

input based estimate

Answer 10

proportion of effort expended relative to the total effort expected to performance obligations

Question 11

Good or service is distinct if it is both

Answer 11

-Capable of being distinct
-Separately identifiable

Question 12

Not performance obligations

Answer 12

Prepayments, Quality-assurance warranties, right to return

Question 13

A warranty is an extended warranty if either

Answer 13

Customer has option to purchase separately or provides service beyond quality assurance

Question 14

Material right

Answer 14

Something the customer would not receive, otherwise, so the seller is obligated to provide it.

Question 15

Estimating price involves

Answer 15

-Variable consideration
-Right of return
-Principal or agent
-Time value of money
-Payments by the seller

Question 16

Variable consideration

Answer 16

portion of a transaction price depends on the outcome of future events

Question 17

Difference between Principal or Agent (Performance Obligation)

Answer 17

Principle provides goods and services, Agent facilotates a transaction between principal and customer.

Question 18

Difference between principal or Agent (Recoding revenue)

Answer 18

Principal: Total sales price paid by customers. Agent: Only the commission it receives on the transaction

Question 19

Adjusted market assement approach

Answer 19

Price if the product or service were sold in the market

Question 20

Ex[ected cost plus margin approach

Answer 20

Estimate the cost of satisfying a performance obligation then add an appropriate profit margin

Question 21

Residual approach

Answer 21

Subtract the sum of the known or estimated stand-alone selling prices of other goods and services in the contract from the total transaction price of the contract.

Question 22

Franchises

Answer 22

Include a license to use intellectual property, as well as initial sales of products and services transferred at the start of the franchise as well as ongoing sales over the life of the franchise.

Question 23

recognizing revenue over time according to percentage of completion (equation)

Answer 23

(total estimated revenue * percentage completed to date) - revenue recognized in prior periods.

Question 24

types of contract losses

Answer 24

Periodic loss, overall loss