Revenue Recognition and
Accounting Exam
1. The second step in the process for revenue recognition is to
A. allocate transaction price to the separate performance obligations.
B. determine the transaction price.
C. identify the contract with customers.
D. identify the separate performance obligations in the contract
2. Which of the following is not a performance obligation?
A. A good that the seller could sell separately and that is separately
identifiable from other goods or services in the contract.
B. A right of return.
C. An option for a customer to purchase goods under terms that are more
advantageous than those enjoyed by other customers.
D. An extended warranty.
3. BestBought Inc. offers a discount on a headset when the headset is
purchased at the time the TV is purchased. The headset normally has a
price of $200, but BestBought offers it for $150 when purchased along with
a TV. BestBought anticipates a 75% chance that a customer will purchase
the headset along with the TV. Assume BestBought sells 1,000 TVs with the
headset discount offer. What is the total stand-alone selling price that
BestBought would use for the headset discount option for purposes of
allocating revenue among the performance obligations in those 1,000 TV?
A. $0
B. $37,500
C. $50,000
D. $150,000
4. New Age Computers manufactures and sells pagers and radio paging
systems which include a 180 day warranty on product defects. It also sells
an extended warranty which provides an additional two years of protection.
On May 10, it sold a paging system for $4,500 and an extended warranty for
another $1,400. The journal entry to record this transaction would include:
A. a credit to Warranty Revenue of $5,900
B. a credit to Warranty Revenue of $1,400
C. a credit to Sales of $4,500 and a credit to Warranty Revenue of $1,400
D. a credit to Unearned Warranty Revenue of $1,400
, 5. On June 1st, Lucy & Bros received an order for 500 cupcakes. Lucy
delivered the cupcakes to the client on June 25th. A $50 deposit was
received on June 5th and the remaining $450 was paid on June 30th. Lucy
likely would recognize revenue on:
A. June 1st
B. June 5th
C. June 25th
D. June 30th
6. Minarski Electronics sells computers and provides hardware
maintenance services. On April 1st, Minarski sold a package deal containing
a computer and a 6-month unlimited maintenance service for the computer
at a bundle price of $1,000. If sold separately, the computer costs $840 and
the 6-month unlimited maintenance/repair service costs $360. How much
revenue does Minarski Electronics recognize for the month ended April
30th, assuming that revenue is accrued monthly?
A. $1,000
B. $900
C. $750
D. $60
7. Shane enters into a contract offering variable consideration. The contract
pays him $1,000/month for six months of continuous consulting services. In
addition, there is a 60% chance the contract will pay an additional $2,000
and a 40% chance the contract will pay an additional $3,000, depending on
the outcome of the consulting contract. Shane concludes that this contract
qualifies for revenue recognition over time. Assume Shane estimates
variable consideration as the expected value. What is the amount of revenue
Shane would recognize for the first month of the contract?
A. $1,000
B. $1,333
C. $1,400
D. $1,200
Accounting Exam
1. The second step in the process for revenue recognition is to
A. allocate transaction price to the separate performance obligations.
B. determine the transaction price.
C. identify the contract with customers.
D. identify the separate performance obligations in the contract
2. Which of the following is not a performance obligation?
A. A good that the seller could sell separately and that is separately
identifiable from other goods or services in the contract.
B. A right of return.
C. An option for a customer to purchase goods under terms that are more
advantageous than those enjoyed by other customers.
D. An extended warranty.
3. BestBought Inc. offers a discount on a headset when the headset is
purchased at the time the TV is purchased. The headset normally has a
price of $200, but BestBought offers it for $150 when purchased along with
a TV. BestBought anticipates a 75% chance that a customer will purchase
the headset along with the TV. Assume BestBought sells 1,000 TVs with the
headset discount offer. What is the total stand-alone selling price that
BestBought would use for the headset discount option for purposes of
allocating revenue among the performance obligations in those 1,000 TV?
A. $0
B. $37,500
C. $50,000
D. $150,000
4. New Age Computers manufactures and sells pagers and radio paging
systems which include a 180 day warranty on product defects. It also sells
an extended warranty which provides an additional two years of protection.
On May 10, it sold a paging system for $4,500 and an extended warranty for
another $1,400. The journal entry to record this transaction would include:
A. a credit to Warranty Revenue of $5,900
B. a credit to Warranty Revenue of $1,400
C. a credit to Sales of $4,500 and a credit to Warranty Revenue of $1,400
D. a credit to Unearned Warranty Revenue of $1,400
, 5. On June 1st, Lucy & Bros received an order for 500 cupcakes. Lucy
delivered the cupcakes to the client on June 25th. A $50 deposit was
received on June 5th and the remaining $450 was paid on June 30th. Lucy
likely would recognize revenue on:
A. June 1st
B. June 5th
C. June 25th
D. June 30th
6. Minarski Electronics sells computers and provides hardware
maintenance services. On April 1st, Minarski sold a package deal containing
a computer and a 6-month unlimited maintenance service for the computer
at a bundle price of $1,000. If sold separately, the computer costs $840 and
the 6-month unlimited maintenance/repair service costs $360. How much
revenue does Minarski Electronics recognize for the month ended April
30th, assuming that revenue is accrued monthly?
A. $1,000
B. $900
C. $750
D. $60
7. Shane enters into a contract offering variable consideration. The contract
pays him $1,000/month for six months of continuous consulting services. In
addition, there is a 60% chance the contract will pay an additional $2,000
and a 40% chance the contract will pay an additional $3,000, depending on
the outcome of the consulting contract. Shane concludes that this contract
qualifies for revenue recognition over time. Assume Shane estimates
variable consideration as the expected value. What is the amount of revenue
Shane would recognize for the first month of the contract?
A. $1,000
B. $1,333
C. $1,400
D. $1,200
