ACC 300 CHAPTER 6 EXAM
QUESTIONS AND ANSWERS
Which methods may be used to estimate the stand-alone prices of goods and services?
- Answer- Expected cost plus margin approach
Residual approach
Adjusted market assessment approach
Licenses typically allow customers to use the seller's Blank______ property. - Answer-
intellectual
Which of the following must a seller recognize as separate line items on the balance
sheet? - Answer- Accounts receivable
Contract liabilities
Contract assets
A long-term contract that includes many products and services that are capable of being
distinct, may be accounted for as a single performance obligation because - Answer-
the seller's role is to combine those products and services prior to delivery or
completion.
In a principal-agent relationship, the agent recognizes revenue to the extent of the -
Answer- sales commission
Which of the following differs between revenue recognized over time and revenue
recognized at completion? - Answer- The timing of recognition
Which of the following must a seller recognize as separate line items on the balance
sheet? (Select all that apply.) - Answer- Contract assets
Accounts receivable
Contract liabilities
Which of the following are included in the journal entry required to record construction
costs for a long-term construction contract?
credit billings on construction contract
credit raw materials
debit cash
debit construction in progress - Answer- credit raw materials
, debit construction in progress
Long-term contracts require careful consideration in identifying performance obligations
because these type of contracts typically include many products and services that -
Answer- could be viewed as separate performance obligations.
The billings on construction account is a contra account to - Answer- construction in
progress.
At the end of the period, if construction in progress is less than billings on construction
contracts, it is recorded as a - Answer- contra liability
The billings on construction contract account is classified as a - Answer- contra asset.
When revenue is recognized upon completion of a long-term contract, CIP is updated to
include gross profit - Answer- upon completion.
The journal entries used to recognize the costs of long-term construction contracts are
identical when revenue is recognized upon completion and when it is recognized over
time; however the two methods differ with respect - Answer- to the timing of revenue
recognition.
When revenue is recognized upon completion of a long-term contract, gross profit is
recognized upon completion in which account? - Answer- Construction in progress
When is gross profit recorded in the construction in progress account for a long-term
contract accounted for upon completion? - Answer- At the completion of the contract.
What is the difference between journal entries to recognize gross profits when revenue
is recognized over time and when revenue is recognized upon completion of a long-
term project? - Answer- timing
The concept or principle that states that companies should recognize revenue when
goods or services are transferred to customers for the amount the company expects to
be entitled to receive in exchange for goods and services is referred to as the: - Answer-
Core revenue recognition principle
Which of the following are key indicators that control of goods or services has been
transferred to the customer? - Answer- Customer has an obligation to pay
Customer accepted the risks and rewards of ownership
Customer has legal title to the asset
Customer has physical possession of the asset
Which of the following services are commonly performed over time? - Answer- Financial
statement audits
Consulting engagements
QUESTIONS AND ANSWERS
Which methods may be used to estimate the stand-alone prices of goods and services?
- Answer- Expected cost plus margin approach
Residual approach
Adjusted market assessment approach
Licenses typically allow customers to use the seller's Blank______ property. - Answer-
intellectual
Which of the following must a seller recognize as separate line items on the balance
sheet? - Answer- Accounts receivable
Contract liabilities
Contract assets
A long-term contract that includes many products and services that are capable of being
distinct, may be accounted for as a single performance obligation because - Answer-
the seller's role is to combine those products and services prior to delivery or
completion.
In a principal-agent relationship, the agent recognizes revenue to the extent of the -
Answer- sales commission
Which of the following differs between revenue recognized over time and revenue
recognized at completion? - Answer- The timing of recognition
Which of the following must a seller recognize as separate line items on the balance
sheet? (Select all that apply.) - Answer- Contract assets
Accounts receivable
Contract liabilities
Which of the following are included in the journal entry required to record construction
costs for a long-term construction contract?
credit billings on construction contract
credit raw materials
debit cash
debit construction in progress - Answer- credit raw materials
, debit construction in progress
Long-term contracts require careful consideration in identifying performance obligations
because these type of contracts typically include many products and services that -
Answer- could be viewed as separate performance obligations.
The billings on construction account is a contra account to - Answer- construction in
progress.
At the end of the period, if construction in progress is less than billings on construction
contracts, it is recorded as a - Answer- contra liability
The billings on construction contract account is classified as a - Answer- contra asset.
When revenue is recognized upon completion of a long-term contract, CIP is updated to
include gross profit - Answer- upon completion.
The journal entries used to recognize the costs of long-term construction contracts are
identical when revenue is recognized upon completion and when it is recognized over
time; however the two methods differ with respect - Answer- to the timing of revenue
recognition.
When revenue is recognized upon completion of a long-term contract, gross profit is
recognized upon completion in which account? - Answer- Construction in progress
When is gross profit recorded in the construction in progress account for a long-term
contract accounted for upon completion? - Answer- At the completion of the contract.
What is the difference between journal entries to recognize gross profits when revenue
is recognized over time and when revenue is recognized upon completion of a long-
term project? - Answer- timing
The concept or principle that states that companies should recognize revenue when
goods or services are transferred to customers for the amount the company expects to
be entitled to receive in exchange for goods and services is referred to as the: - Answer-
Core revenue recognition principle
Which of the following are key indicators that control of goods or services has been
transferred to the customer? - Answer- Customer has an obligation to pay
Customer accepted the risks and rewards of ownership
Customer has legal title to the asset
Customer has physical possession of the asset
Which of the following services are commonly performed over time? - Answer- Financial
statement audits
Consulting engagements
