Chapter 6

Question 1

Revenue

Answer 1

Inflows of assets or settlements of liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations

Question 2

Performance Obligation

Answer 2

Promises to transfer goods and services to a customer; they are satisfied when the seller transfers control of goods or services to the customer

Question 3

Distinct Goods/Services

Answer 3

A good or service is distinct if it is both capable of being distinct and separately identifiable from other goods or services in the contract. It is capable of being distinct if the customer could use the good or service on its own or in combination with other goods and services it could obtain elsewhere. It is separately identifiable if the good or service is distinct in the context of the contract because it is not highly interrelated with other goods and services in the contract. Distinct goods and services are accounted for as separate performance obligations.

Question 4

Transaction Price

Answer 4

The amount the seller expects to be entitled to receive from the customer in exchange for providing goods and services

Question 5

Stand-Alone Selling Price

Answer 5

The amount at which the good or service is sold separately under similar circumstances

Question 6

Contract

Answer 6

An agreement that creates legally enforceable rights and obligations; contracts can be explicit or implicit

Question 7

Prepayments

Answer 7

The cash flow precedes either expense or revenue recognition

Question 8

Quality-Assurance Warranties

Answer 8

Obligation by the seller to make repairs or replace products that are later demonstrated to be defective for some period of time after the salem

Question 9

Extended Warranty

Answer 9

Additional, extended service that covers new problems arising after the buyer takes control of the product