Intermediate Accounting I Exam 2 2024 with 100% Correct Answers| Graded A+

What are the two basic principles in recording revenue? - (1) When? - At the time goods and services are provided to customers and (2) How much? - The amount the company is entitled to receive. FASB's five steps for revenue recognition - -Step 1: Identify the contract with a customer -Step 2: Identify the performance obligations in the contract -Step 3: Determine the transaction price -Step 4: Allocate the transaction price to each performance obligation -Step 5: Record revenue when (or as) each performance obligation is satisfied What is the core revenue recognition principle? - 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. Performance Obligations - promises to transfer goods or services to a customer Performance obligations are satisfied when the seller transfers _______ of goods or services to the customer. - Control How do you determine if their is a contract? - -Legal rights of the buyer and seller have been established.-a seller must believe collectibillity is probable for a contract to exist for purposes of revenue recognition Transaction price - the amount the seller expects to be entitled to receive from the customer in exchange for providing goods and services Indicators that control has been transferred from the seller to the customer - -an obligation to pay the seller -Legal title to the asset -Physical possession of the asset -Assumed the risks and rewards of ownership