FAR CPA F2 ACTUAL EXAM 2025/2026 EXPERT
VERIFIED QUESTIONS WITH DETAILED
ANSWERS| GUARANTEED PASS
Save
Terms in this set (99)
-these are same standards for all profit, non-profit
When do we recognize
-when we satisfy performance obligation
revenue and for how
-for the amount that reflects the expected
much?
consideration (no longer the least amount)
1. Identify contracts with customer (this encompasses
the contract modification idea too)
2. Identify the separate performance obligations in
contract
5 step approach to 3. Determine transaction price
revenue recognition 4. Allocate transaction price to performance
obligations in contract ( just prorate based on
standalone price)
5. Recognize revenue when entity satisfies a
performance obligation
, 1) all parties have approved and have committed to
perform their obligations (can be signing the
contract)
2) the rights of each party regarding contracted
goods or services are identified ie who gets what
5 step approach for 3)payment of terms can be identified
identifying the contract ie 4) the contract has commercial substance meaning
if there is a valid contract future cash flows (amt, risk, timing) are expected to
change as a result of the contract
5)it is probable that the entity will collect substantially
all of the consideration due under the contract
ALL Of these should be met if not need regular
reassessments
an entity can possibly still recognize revenue if the
customer paid their consideration that is
what if all the criteria are NONREFUNDABLE and either there are no remaining
not met to recognize a obligations or the contract has been terminated
contract? -if consideration is refundable then it is booked as a
liability (we also recognize nonrefundable concert
tickets as unearned)
well we may need to combine the contracts into one
What if two contracts are
if they are negotiated as a package with a single
at the same time between
objective, consideration for one contract is tied to the
the same parties?
performance or price of another
a change in the price or scope of a contract and
approved by both parties
-can be a brand new contract OR modification of
Contract modifications
existing contract
-if just treated as existing increase rev for the change
in price
1)the scope increases due to the addition of distinct
When is a modification goods or services (or modification of quality) AND
considered a new 2) the price increase appropriately reflects the stand-
contract? alone selling prices of the newly added
goods/services
, 1) the promise to transfer the good or service is
separately identifiable from other goods or services
separate performance
in the contract AND
obligations must meet
2) the customer can benefit either from the good or
following criteria
service independently or when combined with the
customer's available resources
1)the entity does not integrate the good or service
with other goods or services from the contract
2)the good or service does not customize or modify
now the criteria to see if it
another good or service in the contract
is separately identifiable
3) the good or service does not depend on or relate
to meet criteria 1 of being
to other goods or services promised in the contract
a separate performance
*only one of these has to be met
obligation
ie make sure the goods or services are not
interrelated/interdependent and no bundle of
combined output
why do we care about to determine when to recognize rev ie can we
what is separately recognize it now or have to wait for EVERYTHING to
identifiable or not? be finished
if variable consideration: expected value or most
likely amount (whatever amount is 51%) assuming we
wont be reversing the rev
Rule to determine amount significant financing: just do TVM unless if payment is
of revenue to record (ie anticipated within one year
step 3) If receiving non cash recognize at fair value
if consideration payable to the customer as part of the
contract just decrease the transaction price and
revenue rather than recognize an expense
principle / (1+%)^t
-inital JE would be Service rev and Note receivable
for the TVM. any adjusting entries would be for
Recall how to do TVM
interest revenue and interest receivable. finally the
ending entry would debit cash for full amount and
credit the note receivable and interest receivable
VERIFIED QUESTIONS WITH DETAILED
ANSWERS| GUARANTEED PASS
Save
Terms in this set (99)
-these are same standards for all profit, non-profit
When do we recognize
-when we satisfy performance obligation
revenue and for how
-for the amount that reflects the expected
much?
consideration (no longer the least amount)
1. Identify contracts with customer (this encompasses
the contract modification idea too)
2. Identify the separate performance obligations in
contract
5 step approach to 3. Determine transaction price
revenue recognition 4. Allocate transaction price to performance
obligations in contract ( just prorate based on
standalone price)
5. Recognize revenue when entity satisfies a
performance obligation
, 1) all parties have approved and have committed to
perform their obligations (can be signing the
contract)
2) the rights of each party regarding contracted
goods or services are identified ie who gets what
5 step approach for 3)payment of terms can be identified
identifying the contract ie 4) the contract has commercial substance meaning
if there is a valid contract future cash flows (amt, risk, timing) are expected to
change as a result of the contract
5)it is probable that the entity will collect substantially
all of the consideration due under the contract
ALL Of these should be met if not need regular
reassessments
an entity can possibly still recognize revenue if the
customer paid their consideration that is
what if all the criteria are NONREFUNDABLE and either there are no remaining
not met to recognize a obligations or the contract has been terminated
contract? -if consideration is refundable then it is booked as a
liability (we also recognize nonrefundable concert
tickets as unearned)
well we may need to combine the contracts into one
What if two contracts are
if they are negotiated as a package with a single
at the same time between
objective, consideration for one contract is tied to the
the same parties?
performance or price of another
a change in the price or scope of a contract and
approved by both parties
-can be a brand new contract OR modification of
Contract modifications
existing contract
-if just treated as existing increase rev for the change
in price
1)the scope increases due to the addition of distinct
When is a modification goods or services (or modification of quality) AND
considered a new 2) the price increase appropriately reflects the stand-
contract? alone selling prices of the newly added
goods/services
, 1) the promise to transfer the good or service is
separately identifiable from other goods or services
separate performance
in the contract AND
obligations must meet
2) the customer can benefit either from the good or
following criteria
service independently or when combined with the
customer's available resources
1)the entity does not integrate the good or service
with other goods or services from the contract
2)the good or service does not customize or modify
now the criteria to see if it
another good or service in the contract
is separately identifiable
3) the good or service does not depend on or relate
to meet criteria 1 of being
to other goods or services promised in the contract
a separate performance
*only one of these has to be met
obligation
ie make sure the goods or services are not
interrelated/interdependent and no bundle of
combined output
why do we care about to determine when to recognize rev ie can we
what is separately recognize it now or have to wait for EVERYTHING to
identifiable or not? be finished
if variable consideration: expected value or most
likely amount (whatever amount is 51%) assuming we
wont be reversing the rev
Rule to determine amount significant financing: just do TVM unless if payment is
of revenue to record (ie anticipated within one year
step 3) If receiving non cash recognize at fair value
if consideration payable to the customer as part of the
contract just decrease the transaction price and
revenue rather than recognize an expense
principle / (1+%)^t
-inital JE would be Service rev and Note receivable
for the TVM. any adjusting entries would be for
Recall how to do TVM
interest revenue and interest receivable. finally the
ending entry would debit cash for full amount and
credit the note receivable and interest receivable
