Chapter 8 Flashcards
When should a company recognize revenue?
When they transfer control of an asset (either a good or service) to the customer.
What is a performance obligation?
A promise to transfer a good or service that is distinct.
When is a resource considered readily available?
If it is sold separately by the seller or another entity.
What is the transaction price?
The amount of consideration that the entity expects to be entitled to as a result of providing goods or services to the customer.
What is variable consideration?
When the payment received for providing a good or service is not a fixed amount.
When does the customer have control of an asset?
If they have the ability to direct the use of the asset and receives all of the remaining benefits of owning the assets.
What account is Billings on construction a contra account to?
Contra account to the construction-in-progress account
Reduces the net carrying value of an asset.
What is the Right-to-Return sale?
Providing customers with the ability to return a product.
What is cosignment sale?
An arrangement in which a seller delivers goods to a third party, who sells the goods to the customer.
What is bill-and-hold arrangements?
Transactions where the buyer accepts the title and billings but delays the physical receipt of the goods.
What is channel stuffing?
A practice in which a company induces wholesale distributors to buy more inventory than they can sell in the current period.
