BUS-A 312 Intermediate Accounting II
BUS-A 312 VERIFIED EXAM QUESTIONS AND ANSWERS -
LATEST VERSION 2026/2027
BUS-A 312
INTERMEDIATE ACCOUNTING II (3 CR.)
1. Under ASC 606, which step is the first step of the five-step revenue
recognition model?
A. Identify the contract with the customer
B. Identify the performance obligations in the contract
C. Determine the transaction price
D. Recognize revenue when a performance obligation is satisfied
CORRECT ANSWER : A
Explanation: The model begins by identifying the contract with the customer.
Identifying performance obligations, determining and allocating the
transaction price, and recognizing revenue all follow in later steps.
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2. Under ASC 606, an entity recognizes revenue when it:
A. receives cash from the customer
B. signs a contract with the customer
C. ships goods, regardless of when control passes to the customer
D. satisfies a performance obligation by transferring control of a
promised good or service to the customer
CORRECT ANSWER : D
Explanation: Revenue is tied to the transfer of control. Cash receipt, contract
signing, and shipment alone do not determine when control has passed.
3. Harlan Co. sells equipment and a one-year service plan for a bundled
price of $108,000. The standalone selling prices are $100,000 for the
equipment and $20,000 for the service plan. How much of the transaction
price is allocated to the equipment?
A. $88,000
B. $90,000
C. $100,000
D. $108,000
CORRECT ANSWER : B
Explanation: The transaction price is allocated on relative standalone selling
prices: $108,000 x ($100,000 / $120,000) = $90,000. $100,000 ignores the
bundle discount, $88,000 wrongly applies a residual approach, and $108,000
assigns the whole price to one obligation.
4. Variable consideration is included in the transaction price only to the
extent that:
A. it is reasonably possible that the amount will eventually be collected
B. it is probable that a significant reversal of cumulative revenue will not
occur when the uncertainty is resolved
C. the customer has agreed to the amount in writing
D. the entity has already received cash for the full amount
CORRECT ANSWER : B
Explanation: This is the constraint on variable consideration. Collectibility,
written agreement, and cash receipt are not the tests used to constrain the
estimate.
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5. Delmar Co. sells 1,000 units at $50 each (cost $30 per unit) with a right of
return. Delmar estimates that 5% of the units will be returned. What
revenue should Delmar recognize at the time of sale?
A. $2,500
B. $45,000
C. $47,500
D. $50,000
CORRECT ANSWER : C
Explanation: Revenue is recognized only for units not expected to be
returned: 950 x $50 = $47,500. The $2,500 expected refund is a refund
liability. $50,000 ignores returns and $45,000 over-adjusts for them.
6. Delmar Co. sells 1,000 units at $50 each (cost $30 per unit) with a right of
return and expects 5% of the units to be returned. What amount is recorded
as the asset for the right to recover returned products?
A. $1,500
B. $2,500
C. $28,500
D. $30,000
CORRECT ANSWER : A
Explanation: The return asset is measured at cost: 50 units x $30 = $1,500.
$2,500 is the refund liability at selling price, $28,500 is cost of goods sold for
units not expected to return, and $30,000 is the cost of all units sold.
7. A company pays a $4,000 sales commission to obtain a contract that will
generate revenue over six months. Under ASC 340-40, the company:
A. must capitalize it and amortize it over the life of the customer
relationship regardless of length
B. must record it as a reduction of revenue
C. must record it as goodwill
D. may expense the commission as incurred under the practical
expedient, because the amortization period is one year or less
CORRECT ANSWER : D
Explanation: Incremental costs of obtaining a contract are normally
capitalized, but the practical expedient allows expensing when the
amortization period is one year or less. Commissions are neither a revenue
reduction nor goodwill.
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8. Which of the following is NOT a criterion for recognizing revenue over
time under ASC 606?
A. The customer simultaneously receives and consumes the benefits as
the entity performs
B. The entity's performance creates or enhances an asset that the
customer controls as it is created
C. The customer pays in advance of performance
D. The asset has no alternative use to the entity and the entity has an
enforceable right to payment for performance to date
CORRECT ANSWER : C
Explanation: Advance payment does not determine the timing of revenue
recognition. The other three statements are the actual criteria for over-time
recognition.
9. Brandt Construction has a fixed-price contract of $1,000,000. Costs
incurred in Year 1 were $240,000 and estimated total contract costs are
$800,000. Using the cost-to-cost method, revenue recognized in Year 1 is:
A. $60,000
B. $240,000
C. $300,000
D. $320,000
CORRECT ANSWER : C
Explanation: Progress is $240,000 / $800,000 = 30%, so revenue is 30% x
$1,000,000 = $300,000. $240,000 is the cost incurred, $60,000 is the gross
profit, and $320,000 uses an incorrect percentage.
10. On a long-term contract accounted for over time, if estimated total costs
exceed the contract price, the entity should:
A. defer the loss until the contract is completed
B. recognize the entire expected loss in the period in which it becomes
evident
C. recognize the loss proportionally over the remaining contract term
D. disclose the loss in the notes only
CORRECT ANSWER : B
Explanation: Losses on onerous contracts are recognized in full immediately,
consistent with conservatism. Deferral, proportional recognition, or note-
only disclosure are not acceptable.
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BUS-A 312 VERIFIED EXAM QUESTIONS AND ANSWERS -
LATEST VERSION 2026/2027
BUS-A 312
INTERMEDIATE ACCOUNTING II (3 CR.)
1. Under ASC 606, which step is the first step of the five-step revenue
recognition model?
A. Identify the contract with the customer
B. Identify the performance obligations in the contract
C. Determine the transaction price
D. Recognize revenue when a performance obligation is satisfied
CORRECT ANSWER : A
Explanation: The model begins by identifying the contract with the customer.
Identifying performance obligations, determining and allocating the
transaction price, and recognizing revenue all follow in later steps.
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2. Under ASC 606, an entity recognizes revenue when it:
A. receives cash from the customer
B. signs a contract with the customer
C. ships goods, regardless of when control passes to the customer
D. satisfies a performance obligation by transferring control of a
promised good or service to the customer
CORRECT ANSWER : D
Explanation: Revenue is tied to the transfer of control. Cash receipt, contract
signing, and shipment alone do not determine when control has passed.
3. Harlan Co. sells equipment and a one-year service plan for a bundled
price of $108,000. The standalone selling prices are $100,000 for the
equipment and $20,000 for the service plan. How much of the transaction
price is allocated to the equipment?
A. $88,000
B. $90,000
C. $100,000
D. $108,000
CORRECT ANSWER : B
Explanation: The transaction price is allocated on relative standalone selling
prices: $108,000 x ($100,000 / $120,000) = $90,000. $100,000 ignores the
bundle discount, $88,000 wrongly applies a residual approach, and $108,000
assigns the whole price to one obligation.
4. Variable consideration is included in the transaction price only to the
extent that:
A. it is reasonably possible that the amount will eventually be collected
B. it is probable that a significant reversal of cumulative revenue will not
occur when the uncertainty is resolved
C. the customer has agreed to the amount in writing
D. the entity has already received cash for the full amount
CORRECT ANSWER : B
Explanation: This is the constraint on variable consideration. Collectibility,
written agreement, and cash receipt are not the tests used to constrain the
estimate.
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5. Delmar Co. sells 1,000 units at $50 each (cost $30 per unit) with a right of
return. Delmar estimates that 5% of the units will be returned. What
revenue should Delmar recognize at the time of sale?
A. $2,500
B. $45,000
C. $47,500
D. $50,000
CORRECT ANSWER : C
Explanation: Revenue is recognized only for units not expected to be
returned: 950 x $50 = $47,500. The $2,500 expected refund is a refund
liability. $50,000 ignores returns and $45,000 over-adjusts for them.
6. Delmar Co. sells 1,000 units at $50 each (cost $30 per unit) with a right of
return and expects 5% of the units to be returned. What amount is recorded
as the asset for the right to recover returned products?
A. $1,500
B. $2,500
C. $28,500
D. $30,000
CORRECT ANSWER : A
Explanation: The return asset is measured at cost: 50 units x $30 = $1,500.
$2,500 is the refund liability at selling price, $28,500 is cost of goods sold for
units not expected to return, and $30,000 is the cost of all units sold.
7. A company pays a $4,000 sales commission to obtain a contract that will
generate revenue over six months. Under ASC 340-40, the company:
A. must capitalize it and amortize it over the life of the customer
relationship regardless of length
B. must record it as a reduction of revenue
C. must record it as goodwill
D. may expense the commission as incurred under the practical
expedient, because the amortization period is one year or less
CORRECT ANSWER : D
Explanation: Incremental costs of obtaining a contract are normally
capitalized, but the practical expedient allows expensing when the
amortization period is one year or less. Commissions are neither a revenue
reduction nor goodwill.
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8. Which of the following is NOT a criterion for recognizing revenue over
time under ASC 606?
A. The customer simultaneously receives and consumes the benefits as
the entity performs
B. The entity's performance creates or enhances an asset that the
customer controls as it is created
C. The customer pays in advance of performance
D. The asset has no alternative use to the entity and the entity has an
enforceable right to payment for performance to date
CORRECT ANSWER : C
Explanation: Advance payment does not determine the timing of revenue
recognition. The other three statements are the actual criteria for over-time
recognition.
9. Brandt Construction has a fixed-price contract of $1,000,000. Costs
incurred in Year 1 were $240,000 and estimated total contract costs are
$800,000. Using the cost-to-cost method, revenue recognized in Year 1 is:
A. $60,000
B. $240,000
C. $300,000
D. $320,000
CORRECT ANSWER : C
Explanation: Progress is $240,000 / $800,000 = 30%, so revenue is 30% x
$1,000,000 = $300,000. $240,000 is the cost incurred, $60,000 is the gross
profit, and $320,000 uses an incorrect percentage.
10. On a long-term contract accounted for over time, if estimated total costs
exceed the contract price, the entity should:
A. defer the loss until the contract is completed
B. recognize the entire expected loss in the period in which it becomes
evident
C. recognize the loss proportionally over the remaining contract term
D. disclose the loss in the notes only
CORRECT ANSWER : B
Explanation: Losses on onerous contracts are recognized in full immediately,
consistent with conservatism. Deferral, proportional recognition, or note-
only disclosure are not acceptable.
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