FINANCIAL ACCOUNTING FINAL STUDY GUIDE ( graded A+ and with verified solutions)

Companies recognize revenue when goods or services are transferred to customers for the amount the company expects to be entitled to receive in exchange for those goods or services. - ANSTrue Revenue should be recognized over time for the construction of an annex to a building that the customer owns, even if the seller will not receive payment until the annex is completed. - ANSTrue Which of the following is one of the steps for recognizing revenue? -Identify the performance obligations of the contract. -Estimate the total transaction price of the contract based on monetary consideration received. -Allocate all revenue to the performance obligation with the largest stand-alone selling price. -Determine whether bad debts can be reasonably estimated. - ANS-Identify the performance obligations of the contract. Which one of the following is not one of the five steps for recognizing revenue? -Identify the separate performance obligation(s) in the contract. -Identify the contract with a customer. -Allocate the transaction price to the separate performance obligations. -Recognize revenue when all the performance obligations have been satisfied. - ANS-Recognize revenue when all the performance obligations have been satisfied. Stayman Associates has sold a good to a buyer and wants to recognize revenue. Which of the following is an indicator that control of a good has passed from Stayman to the buyer? - ANSBuyer has assumed the risk and rewards of ownership. Consider the following three scenarios: I. ABC Lawncare performed lawn maintenance services for Drake Inc. on June 1st, and received payment of $500 for those services. II. On June 1st, Melly Corp received payment for 100 pounds of raw material to be delivered to Drake Inc. in 6 months. III. Lodo, LLC collected cash on June 1st for services rendered on May 1st. Given these scenarios, revenue should be recognized on June 1st for: - ANSI only. A contract between a seller and a buyer need not be in writing to be enforceable. - ANSTrue The right of return is a separate performance obligation, and a portion of the transaction price needs to be allocated to it for revenue recognition. - ANSFalse