accounting 5110 exam( A+ graded and with accurate solutions)

five step revenue recognition process - ANS1. identify the contract with the customer 2. identify the performance obligations (single or multiple) 3. determine the transaction price 4. allocated the transaction price (all at once or a period in time) 5. recognize revenue when or as the entity satisfies the performance obligation performance obligation - ANSa promise by the seller to transfer goods or services to a customer; the seller recognizes revenue when it satisfies this control - ANSdirect influence over the good/service and the ability to obtain benefits from the good/service distinct good or service - ANScapable of being used on its own or in combination with other goods and services obtained elsewhere (e.g. earbuds that came with an iphone); separately identifiable from other goods and services in the contract (e.g. installation fees with the purchase of a TV) point in time revenue recognition - ANSthere has been full satisfaction of the performance obligation and control of the good/service has passed to the buyer a customer is more likely to control a good or service if the customer has: - ANS1. an obligation to pay the seller 2. legal title to the asset 3. physical possession of the asset 4. assumed the risks and rewards 5. accepted the asset revenue is recognized over a period of time if one of the following three conditions exist: - ANS1. The customer consumes the benefit of the seller's work as it is created (e.g. a subscription service) 2. The customer controls the asset as it is created (e.g. a building extension) 3. The seller is creating an asset that has no alternative use to the seller (e.g. customized jets for the air force) output-based revenue recognition - ANSmeasured as the proportion of the goods or services transferred to date