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Exam 5: Income Measurement

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Question 61

Multiple Choice

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How much of the $1 million initial license fee should the UFL recognize as revenue in the first year of the contract?

A) $0
B) $250,000
C) $1,000,000
D) Cannot tell from information given.

E) B) and C)
F) None of the above

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Question 62

Multiple Choice

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Which of the following applies to a seller who is an agent?

A) Warehouses inventory
B) Liable for the delivery of goods or services to the client
C) Charges a commission for each transaction
D) Records revenue at full transaction price

E) A) and B)
F) A) and C)

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Question 63

Multiple Choice

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In 2015,JRE2 would report (rounded to the nearest thousand) gross profit (loss) of:

In 2017,Reliable would recognize gross profit of:

Use of the installment sales method indicates little uncertainty about collection of the receivable.

Which of the following is not an approach for estimating stand-alone selling prices?

Which of the following statement is most true?

Briefly explain the difference between an account receivable,a contract asset,and a contract liability.

The probability that the customer will pay the seller does not affect whether a contract exists for purposes of revenue recognition.

Which of the following is not true about accounting for long-term construction contracts?

On December 28,2016,Omega Steel,Inc.sold $100,000 of steel sheets to a car manufacturer.Due to holidays,Omega was unable to find a truck driver to deliver the product.Delivery was finally made on January 5,2017. Required: How much revenue should Omega recognize in 2016 for the sale to the car manufacturer? Explain your answer.

A fee for recording a new customer in the seller's information system should be treated as a separate performance obligation and should be recognized upon payment.

On January 1,2016,Elite Advertising was contracted to run a marketing campaign for Pharm King's new dieting pills.In addition to getting a base fee of $150,000 for the 3-year campaign,Elite also may get an additional 5% of the base fee as a bonus if a targeted sales level is reached at the end of three years.Elite currently lacks sufficient information to make an estimate of the likelihood of the expected bonus,with the marketing director indicating that "If you forced me to make an estimate,I'd say we have a 50/50 chance.But don't quote me on that - it's really too early to tell." Elite concludes this contract qualifies for revenue recognition over time,and estimates variable consideration using the most likely amount.How much revenue should Elite recognize as of December 31,2016?

Assume that,on April 1,2016,a customer visits MicrosoftStore.com and purchases Microsoft Windows 7 Ultimate for $170.Windows 7 Ultimate comes in a DVD format which the customer can use permanently,and Microsoft does not expect that its actions subsequent to April 1,2016 will affect the value the customer obtains from using the software. Required: How much revenue should Microsoft recognize in 2016 with respect to this particular transaction?

Which of the following is most true regarding consignment arrangements?

Use the following to answer questions The following partial income statement and balance sheet information (in $ millions)comes from the Annual Report of Saratoga Springs Co.for the year ending 12/31/2016: Required: Compute the following amounts for Saratoga Springs Co. -Its average collection period for 2016.Round your final answer to one decimal place.

A transfer of goods or services is complete when the customer has control over the goods or services.

If the seller is a principal,the seller should recognize gross revenue and cost of sales associated with the transaction.

Staff Accounting Bulletin No.101 was issued by the FASB to clarify its guidelines on revenue recognition.

In its December 31,2016,balance sheet,Lake would report: