F2-M1 Revenue Recognition

Question 1

When to recognize revenue at point in time method

Answer 1

Revenue to be recognized upon completion of contract, only losses to be recognized immediately irrespective of method

Question 2

When service contract are sold , how to Account for service revenue

Answer 2

When service contracts are sold Deferred revenue increases but service revenue only increses when service are performed.

Question 3

When calculating construction profit of current period, what is needs to be take in to consideration

Answer 3

First you need to deduct cost till date from contract price
then you have to figure total cost from the problem
then it will arrive for gross profit
then very important to find percentage completion of work by taking into consideration (cost to date/ total cost of construction.
then percentage complete multiply by gross profit will give profit for current period

Question 4

what is the effect on treasury stock on debt to capital ratio?

Answer 4

when we repurchase share total stock holders equity reduce and total debt remain same so debt to equity ratio increases