ACC 212 – Exam 3 – Accounting Principles – study
material
T or F: A company's income statement might use "sales revenue" or "service revenue" to
describe the transfer of goods or services to customers. - correct answer ✔✔True
T or F: Sales revenue is often the smallest amount depicted in a company's income statement. -
correct answer ✔✔False
T or F: Riley's Produce Stand only accepts cash or Venmo as payment. It does not extend credit
to customers. Therefore, Riley's Produce Stand will not report bad debt expense on its income
statement. - correct answer ✔✔True
T or F: There is no relationship between revenue recognition and a seller's promise to deliver
goods and services to customers. - correct answer ✔✔False
T or F: Although credit card transactions are subject to a processing fee, many sellers accept
credit cards because they offer a convenient way to promptly collect payment from customers. -
correct answer ✔✔True
In the sales process, an enterprise provides goods and services to ______ in exchange for
________. - correct answer ✔✔customers, cash
________________ revenue is a current liability that arises when an enterprise receives cash
from customers before providing promised goods or services. - correct answer
✔✔deferred/unearned
What does a customer ultimately transfer to a seller as part of the sales process? - correct
answer ✔✔Inventory
, What might be an initial element of the sales process? - correct answer ✔✔A customer inquiry
What income statement subtotal is equal to net sales minus cost of goods sold? - correct
answer ✔✔Gross profit
What balance sheet asset might informally be noted as "A/R"? - correct answer ✔✔Accounts
Receivable
What term does the FASB use to describe a seller's promise to deliver goods or services to
customers? - correct answer ✔✔Performance obligations
During which step of the FASB's revenue recognition process will an enterprise recognize
revenue? - correct answer ✔✔Step 5
Griffin's Game Gear manufactures pickleball racquets. The company sells racquets directly to
customers for a selling price of $30. Customers can optionally purchase a two-year extended
warranty for $10. If a customer purchases both a racquet and the extended warranty, how many
performance obligations exist? - correct answer ✔✔Two
Messing Pavement Professionals (Messing) recently signed a contract to repave Campus Drive
that runs through GVSU's Allendale campus. The base contract price is $3,000,000. Messing
could earn a $10,000-per-day bonus if it completes the job ahead of schedule. Depending upon
facts, circumstances, and Messing's managerial judgments, which of the following amounts
could be the transaction price identified in step #3 of the revenue recognition process if
Messing is highly confident that it will complete the job 10 days early? - correct answer
✔✔Depending upon facts and circumstances, either amount could be possible
On October 31, 2022, Lah's Financial Advising Service (Lah Financial) signed a contract to
provide financial planning services to a customer during November and December 2022. Lah
Financial received a $5,000 deposit from the client, and immediately deposited this amount into
material
T or F: A company's income statement might use "sales revenue" or "service revenue" to
describe the transfer of goods or services to customers. - correct answer ✔✔True
T or F: Sales revenue is often the smallest amount depicted in a company's income statement. -
correct answer ✔✔False
T or F: Riley's Produce Stand only accepts cash or Venmo as payment. It does not extend credit
to customers. Therefore, Riley's Produce Stand will not report bad debt expense on its income
statement. - correct answer ✔✔True
T or F: There is no relationship between revenue recognition and a seller's promise to deliver
goods and services to customers. - correct answer ✔✔False
T or F: Although credit card transactions are subject to a processing fee, many sellers accept
credit cards because they offer a convenient way to promptly collect payment from customers. -
correct answer ✔✔True
In the sales process, an enterprise provides goods and services to ______ in exchange for
________. - correct answer ✔✔customers, cash
________________ revenue is a current liability that arises when an enterprise receives cash
from customers before providing promised goods or services. - correct answer
✔✔deferred/unearned
What does a customer ultimately transfer to a seller as part of the sales process? - correct
answer ✔✔Inventory
, What might be an initial element of the sales process? - correct answer ✔✔A customer inquiry
What income statement subtotal is equal to net sales minus cost of goods sold? - correct
answer ✔✔Gross profit
What balance sheet asset might informally be noted as "A/R"? - correct answer ✔✔Accounts
Receivable
What term does the FASB use to describe a seller's promise to deliver goods or services to
customers? - correct answer ✔✔Performance obligations
During which step of the FASB's revenue recognition process will an enterprise recognize
revenue? - correct answer ✔✔Step 5
Griffin's Game Gear manufactures pickleball racquets. The company sells racquets directly to
customers for a selling price of $30. Customers can optionally purchase a two-year extended
warranty for $10. If a customer purchases both a racquet and the extended warranty, how many
performance obligations exist? - correct answer ✔✔Two
Messing Pavement Professionals (Messing) recently signed a contract to repave Campus Drive
that runs through GVSU's Allendale campus. The base contract price is $3,000,000. Messing
could earn a $10,000-per-day bonus if it completes the job ahead of schedule. Depending upon
facts, circumstances, and Messing's managerial judgments, which of the following amounts
could be the transaction price identified in step #3 of the revenue recognition process if
Messing is highly confident that it will complete the job 10 days early? - correct answer
✔✔Depending upon facts and circumstances, either amount could be possible
On October 31, 2022, Lah's Financial Advising Service (Lah Financial) signed a contract to
provide financial planning services to a customer during November and December 2022. Lah
Financial received a $5,000 deposit from the client, and immediately deposited this amount into
