Concepts

Question 1

How is deferred gross profit calculated under the installment method?

Answer 1

The percentage of profit for each year multiplied by ending installment receivable for each year.

Question 2

Timeliness relates to what fundamental characteristic of GAAP?

Answer 2

Relevance and faithful representation.

Question 3

What is considered an application of systematic and rational allocation? Officer salaries, amortization, sales commissions.

Answer 3

amortization.

Question 4

Is depletion allocation, amortization or both?

Answer 4

Both. Amortization is part of allocation, and both depletion and depreciation is amortization.

Question 5

How is revenue recognized for nonrefundable sale of tickets?

Answer 5

Deferred revenue. Even though nonrefundable, revenue must be EARNED.

Question 6

Under IFRS, do major components need to be depreciated separately or together?

Answer 6

Separately.

Question 7

Under the installment method, is deferred gross profit recorded as a liability or a contra asset?

Answer 7

Contra asset.

Question 8

Does comprehensive income include gains/gross margins?

Answer 8

Yes to both.

Question 9

When there is an unlimited right of return/sale is only committed if resold, then revenue is recongnized…

Answer 9

None until sold.

Question 10

How should a change in entity be reported in the financial statements?

Answer 10

Retrospectively with prior financial statements.

Question 11

Franchise fees, if there are no future services required and fees are non refundable, revenue is recognized….

Answer 11

In the year of the transaction. The company has already earned the fees.