Quiz 3

Question 1

The first step in the revenue recognition process is to identify the separate performance obligations in the contract.

Answer 1

F

Question 2

If the performance obligation is not highly dependent on, or interrelated with, other promises in the contract, then each performance obligation should be accounted for separately.

Answer 2

T

Question 3

DHC Company purchased a patent from BCE Corp on July 31, 2016. The patent is a financial asset.

Answer 3

F. Intangible Asset

Question 4

On September 10, 2015, ABC Co. Entered into a contract with BE Inc. To transfer its specialty products (sales value of €30,000, cost of €16,500) on October 15, 2015. ABC Co. Should recognize the revenue on September 10, 2015.

Answer 4

F

Question 5

Debt investments not held for collection are reported at

Answer 5

Fair value.

Question 6

Debt investments that are accounted for and reported at amortized cost, are

Answer 6

Held-for-collection debt investments.

Question 7

A held-for-collection debt investment is purchased at a premium. The entry to record the amortization of the premium includes a

Answer 7

Credit to Debt Investments.

Question 8

Unrealized holding gains or losses on trading investments are reported in

Answer 8

Net income.

Question 9

Santo Corporation declares and distributes a cash dividend that is a result of current earnings. How will the receipt of those dividends affect the investment account of the investor under each of the following accounting methods?

Answer 9

Fair Value Method No effect

Equity Method Decrease

Question 10

The first step in the process for revenue recognition is to

Answer 10

Identify the contract with the customer.

Question 11

The second step in the process for revenue recognition is to

Answer 11

Identify the separate performance obligations in the contract.

Question 12

A contract

Answer 12

Is an agreement that creates enforceable rights and obligations.

Question 13

When multiple performance obligations exist in a contract, they should be accounted for as a single performance obligation when

Answer 13

Each service is highly interdependent and interrelated.

Question 14

Revenue from a contract with a customer cannot be recognized until a contract exists.

Answer 14

T

Question 15

Companies measure debt investments at fair value if the objective of the company’s business model is to hold the financial asset to collect the contractual cash flows.

Answer 15

F

Question 16

The Unrealized Holding Gain or Loss–Income account is reported in the other income and expense section of the income statement.

Answer 16

T

Question 17

Which of the following statements is true regarding the differences between amortized cost and fair value for debt investments?

Answer 17

Under the fair value approach, an unrealized gain or loss is recorded in each year whereas no unrealized gains or losses are recorded under the amortized cost method.