Revenue Recognition

Question 1

JE for revenue allocated to the warranty while the performance obligation is being satisfied over the 3 term:

Answer 1

Cash (or A/R) XXXX
Sales Revenue XXXX
Deferred revenue - Warranty XXXX

Question 2

Prepayments are recorded as a contract liability

Answer 2

Nonrefundable prepayments may be income

Question 3

Cost of sales XXXX
Inventory XXXX

Answer 3

JE

Question 4

Cash XXX
Unearned Revenue XXX

Answer 4

JE - Unearned Revenue XXX
Sales Revenue XXX

Question 5

If cash receipts exceed expected amount, excess reported as _______________

Answer 5

refund liability

Question 6

RIGHT TO USE - Revenue will be recognized at a point in time

Answer 6

RIGHT TO ACCESS - revenue will be recognized over the term of the license.

Question 7

Costs of obtaining a contract are expensed

Answer 7

Recoverable incremental costs should be CAPITALIZED.

Question 8

A tenant pays a building mgt firm $24,000 for 2 years’ rent from Aug, Yr 3

Answer 8

Cash 24000
Deferred Revenue 24000

Question 9

JE for billings from LT construction contracts, what account would be debited in the billings entry when billings entry when revenue is recognized at a point in time and over a period of time.

Answer 9

Construction Receivable would be debited

Question 10

Accounting for LT Construction contracts, BS Accounts (To record capitalized construction costs)

Answer 10

CIP XXX
Cash XXX

Question 11

To record billings (i.e. invoices) sent to customers, LT Contracts

Answer 11

Construction Receivable XXX
Billings on construction contracts XXX

Question 12

To record Cash collected from customers, LT Contracts

Answer 12

Cash XXX
Construction receivable XXX