Revenue Recognition Flashcards
_____ is (are) used to alter the terms and conditions of recorded sales transactions to entice customers to accept the delivery of goods and services.
Side agreements
The calculation of the income recognized in the third year of a five-year construction contract accounted for using the uses input method prescribed in ASC 606 that recognizes revenue over time includes the ratio of ___
Total cost incurred to date to total estimated costs
Which of the following situations may result in recognition over time of revenue from a contract with a customer by an entity?
The customer simultaneously receives and consumes the benefits from performance as the entity performs.
An entity recognizes revenue when (or as) it satisfies each performance obligation in the contract by transferring the promised good or service (an asset) to a customer. An asset is transferred when the customer obtains control of that asset. When the customer simultaneously receives and consumes the benefits from performance as the entity performs, revenue is recognized over time.
Under ASC 606, which of the following methods, if any, are acceptable for estimating the amount of variable consideration in contracts with customers?
Adjusted Market - NO
Assessment
Minimum Amount in the
Range of Possible Amounts - NO
answer (D) is correct.
The amount of variable consideration must be estimated by applying consistently throughout the contract period one of two methods: (1) expected value or (2) most likely amount. The expected value method may provide an appropriate estimate if an entity has a large number of contracts with similar characteristics. The expected value is the sum of probability-weighted amounts in the range of possible consideration amounts. The most likely amount method may provide an appropriate estimate if the contract has only two possible outcomes. The most likely amount is the single most likely amount in a range of possible consideration amounts.
