WGU D217 Accounting Information Systems 100 Original Multiple-
Choice Practice Questions with Answers and Rationales 2026/2027
Revenue Recognition
1. What is the first step in the five step revenue recognition model?
A. Identify the contract with a customer
B. Determine the transaction price
C. Recognize revenue
D. Allocate overhead
Answer: A. Identify the contract with a customer
Rationale: The model begins by identifying a qualifying contract; subsequent steps
identify obligations, determine price, allocate price, and recognize revenue.
2. A promised good is distinct when the customer can benefit from it and
what other condition holds?
A. Its price exceeds cost
B. The promise is separately identifiable in the contract
C. Cash is collected immediately
D. It is delivered by a different employee
Answer: B. The promise is separately identifiable in the contract
Rationale: Both capability of being distinct and distinctness within the contract are
needed to identify a separate performance obligation.
3. A company sells equipment and a distinct service for $120,000. Standalone
prices are $100,000 and $50,000. How much is allocated to equipment?
A. $60,000
B. $120,000
C. $80,000
D. $100,000
Answer: C. $80,000
Rationale: Relative standalone allocation gives $120,000 × $100,000/$150,000 =
$80,000.
,4. For the same $120,000 contract, standalone equipment and service prices
are $100,000 and $50,000. How much is allocated to service?
A. $50,000
B. $20,000
C. $60,000
D. $40,000
Answer: D. $40,000
Rationale: Service receives $120,000 × $50,000/$150,000 = $40,000.
5. A customer prepays $36,000 for 12 months of evenly provided service.
After three months, how much revenue is recognized?
A. $9,000
B. $3,000
C. $27,000
D. $36,000
Answer: A. $9,000
Rationale: Three of 12 months have been earned: $36,000 × 3/12 = $9,000.
6. When a performance obligation does not qualify for over time recognition,
revenue is recognized when what occurs?
A. Production costs are first incurred
B. Control transfers at a point in time
C. The sales budget is approved
D. The contract is merely discussed
Answer: B. Control transfers at a point in time
Rationale: Point in time recognition focuses on when the customer obtains control.
7. A customer simultaneously receives and consumes benefits as a service is
performed. This generally supports which recognition pattern?
A. Before the contract exists
B. Only at the next year end
C. Over time
D. Only after final cash collection
Answer: C. Over time
Rationale: Simultaneous receipt and consumption is one criterion for over time
recognition.
, 8. A qualifying over time project has a $1,000,000 transaction price,
$200,000 costs incurred, and $800,000 total estimated costs. Under a faithful
cost to cost measure, what is cumulative revenue?
A. $200,000
B. $800,000
C. $1,000,000
D. $250,000
Answer: D. $250,000
Rationale: Progress is $200,000/$800,000 = 25%; cumulative revenue is
$1,000,000 × 25% = $250,000.
9. Cumulative revenue should be $250,000 and $160,000 was recognized
previously. What is current period revenue?
A. $90,000
B. $160,000
C. $250,000
D. $410,000
Answer: A. $90,000
Rationale: Current revenue equals the cumulative amount less revenue recognized
in earlier periods.
10. Variable consideration is included in transaction price only to the extent
that what is probable?
A. Gross margin will exceed 50%
B. A significant reversal of cumulative revenue will not occur when uncertainty is
resolved
C. The highest possible bonus will be earned
D. All customers will renew forever
Answer: B. A significant reversal of cumulative revenue will not occur when
uncertainty is resolved
Rationale: The variable consideration constraint limits revenue exposed to
significant future reversal.
Choice Practice Questions with Answers and Rationales 2026/2027
Revenue Recognition
1. What is the first step in the five step revenue recognition model?
A. Identify the contract with a customer
B. Determine the transaction price
C. Recognize revenue
D. Allocate overhead
Answer: A. Identify the contract with a customer
Rationale: The model begins by identifying a qualifying contract; subsequent steps
identify obligations, determine price, allocate price, and recognize revenue.
2. A promised good is distinct when the customer can benefit from it and
what other condition holds?
A. Its price exceeds cost
B. The promise is separately identifiable in the contract
C. Cash is collected immediately
D. It is delivered by a different employee
Answer: B. The promise is separately identifiable in the contract
Rationale: Both capability of being distinct and distinctness within the contract are
needed to identify a separate performance obligation.
3. A company sells equipment and a distinct service for $120,000. Standalone
prices are $100,000 and $50,000. How much is allocated to equipment?
A. $60,000
B. $120,000
C. $80,000
D. $100,000
Answer: C. $80,000
Rationale: Relative standalone allocation gives $120,000 × $100,000/$150,000 =
$80,000.
,4. For the same $120,000 contract, standalone equipment and service prices
are $100,000 and $50,000. How much is allocated to service?
A. $50,000
B. $20,000
C. $60,000
D. $40,000
Answer: D. $40,000
Rationale: Service receives $120,000 × $50,000/$150,000 = $40,000.
5. A customer prepays $36,000 for 12 months of evenly provided service.
After three months, how much revenue is recognized?
A. $9,000
B. $3,000
C. $27,000
D. $36,000
Answer: A. $9,000
Rationale: Three of 12 months have been earned: $36,000 × 3/12 = $9,000.
6. When a performance obligation does not qualify for over time recognition,
revenue is recognized when what occurs?
A. Production costs are first incurred
B. Control transfers at a point in time
C. The sales budget is approved
D. The contract is merely discussed
Answer: B. Control transfers at a point in time
Rationale: Point in time recognition focuses on when the customer obtains control.
7. A customer simultaneously receives and consumes benefits as a service is
performed. This generally supports which recognition pattern?
A. Before the contract exists
B. Only at the next year end
C. Over time
D. Only after final cash collection
Answer: C. Over time
Rationale: Simultaneous receipt and consumption is one criterion for over time
recognition.
, 8. A qualifying over time project has a $1,000,000 transaction price,
$200,000 costs incurred, and $800,000 total estimated costs. Under a faithful
cost to cost measure, what is cumulative revenue?
A. $200,000
B. $800,000
C. $1,000,000
D. $250,000
Answer: D. $250,000
Rationale: Progress is $200,000/$800,000 = 25%; cumulative revenue is
$1,000,000 × 25% = $250,000.
9. Cumulative revenue should be $250,000 and $160,000 was recognized
previously. What is current period revenue?
A. $90,000
B. $160,000
C. $250,000
D. $410,000
Answer: A. $90,000
Rationale: Current revenue equals the cumulative amount less revenue recognized
in earlier periods.
10. Variable consideration is included in transaction price only to the extent
that what is probable?
A. Gross margin will exceed 50%
B. A significant reversal of cumulative revenue will not occur when uncertainty is
resolved
C. The highest possible bonus will be earned
D. All customers will renew forever
Answer: B. A significant reversal of cumulative revenue will not occur when
uncertainty is resolved
Rationale: The variable consideration constraint limits revenue exposed to
significant future reversal.
