SOLUTIONS MANUAL FOR INTERMEDIATE
ACCOUNTING (18TH EDITION)
◍ A warranty that the product meets agreed-upon
specifications in the contract at the time the product
is sold. Answer: Assurance-type
warranty
◍ A contract under which an entity bills a customer for a product but the
entity retains physical possession of the product until it is transferred to
the customer at a point in time in the future. Answer: Bill-and-hold
arrangement.
◍ Under the percentage-of-completion method, the balance in this
account is subtracted from Construction in Process to avoid double-
counting the inventory. Answer: Billings account.
◍ The risk that a customer will be unable to pay the
amount of consideration in accordance with a
contract. Answer: Collectibility.
◍ The accounting for long-term construction contracts where revenues
and gross profit are recognized at a point in time, that is, when the
contract is completed. Answer: Completed-contract
method.
,◍ The party that receives goods from a consignor under a consignment.
Answer: Consignee.
◍ The consignor (manufacturer or wholesaler) ships merchandise to the
consignee (dealer), who is to act as an agent for the consignor in selling
the merchandise. Answer: Consignment.
◍ The party that sends goods to a consignee under
consignment. Answer: Consignor.
◍ The payments received in return for the continuing rights granted by
the franchise agreement and for providing such services as management
training, advertising and promotion, legal assistance, and other support.
Answer: Continuing franchise fees.
◍ An agreement that creates enforceable rights or obligations. Answer:
Contract.
◍ There are two types: (1) unconditional rights to
receive consideration because the company has
satisfied its performance obligation with a customer,
and (2) conditional rights to receive consideration
because the company has satisfied one performance
obligation but must satisfy another performance
,obligation in the contract before it can bill the
customer. Answer: Contract assets.
◍ A company's obligation to transfer goods or services
to a customer for which the company has received
consideration form the customer also generally referred to as Unearned
Sales Revenue. Answer: Contract liabilities.
◍ When parties to a contract change the contract terms while it is
ongoing. Answer: Contract modification.
◍ A method used under the percentage-of-completion method to
estimate the extent of progress toward completion. Compares costs
incurred to date with the most recent estimate of the total costs required
to complete the contract. Answer: Cost-to-cost
basis.
◍ A contractual arrangement whereby a franchisor
grants business rights and provides services to a
franchisee who in return agrees to pay an initial
franchise fee to operate a business and pay
continuing fees based on the operations of the
business. Answer: Franchise.
, ◍ The party who operates the franchised business. Answer: Franchisee.
◍ The party who grants business rights under the franchise. Answer:
Franchisor.
◍ A payment for establishing the franchise relationship
and providing some initial services. Answer: Initial franchise fee.
◍ When measuring the extent of progress under the percentage-of-
completion method, these are the costs incurred and labor hours worked
and other efforts devoted to a contract. Answer: Input measures.
◍ When measuring the extent of progress under the percentage-of-
completion method, these are the quantities or units completed on the
project (such as tons produced, floors of building completed, miles of
highway completed). Answer: Output measures.
◍ The accounting for long-term construction contracts where revenues,
costs, and gross profit are recognized as a company makes progress
toward completion of the contract based on the percentage of
completion. Answer: Percentage-of-completion method.
◍ A promise to provide a product or service to a customer. Answer:
Performance obligation.
◍ The principal's performance obligation is to provide
ACCOUNTING (18TH EDITION)
◍ A warranty that the product meets agreed-upon
specifications in the contract at the time the product
is sold. Answer: Assurance-type
warranty
◍ A contract under which an entity bills a customer for a product but the
entity retains physical possession of the product until it is transferred to
the customer at a point in time in the future. Answer: Bill-and-hold
arrangement.
◍ Under the percentage-of-completion method, the balance in this
account is subtracted from Construction in Process to avoid double-
counting the inventory. Answer: Billings account.
◍ The risk that a customer will be unable to pay the
amount of consideration in accordance with a
contract. Answer: Collectibility.
◍ The accounting for long-term construction contracts where revenues
and gross profit are recognized at a point in time, that is, when the
contract is completed. Answer: Completed-contract
method.
,◍ The party that receives goods from a consignor under a consignment.
Answer: Consignee.
◍ The consignor (manufacturer or wholesaler) ships merchandise to the
consignee (dealer), who is to act as an agent for the consignor in selling
the merchandise. Answer: Consignment.
◍ The party that sends goods to a consignee under
consignment. Answer: Consignor.
◍ The payments received in return for the continuing rights granted by
the franchise agreement and for providing such services as management
training, advertising and promotion, legal assistance, and other support.
Answer: Continuing franchise fees.
◍ An agreement that creates enforceable rights or obligations. Answer:
Contract.
◍ There are two types: (1) unconditional rights to
receive consideration because the company has
satisfied its performance obligation with a customer,
and (2) conditional rights to receive consideration
because the company has satisfied one performance
obligation but must satisfy another performance
,obligation in the contract before it can bill the
customer. Answer: Contract assets.
◍ A company's obligation to transfer goods or services
to a customer for which the company has received
consideration form the customer also generally referred to as Unearned
Sales Revenue. Answer: Contract liabilities.
◍ When parties to a contract change the contract terms while it is
ongoing. Answer: Contract modification.
◍ A method used under the percentage-of-completion method to
estimate the extent of progress toward completion. Compares costs
incurred to date with the most recent estimate of the total costs required
to complete the contract. Answer: Cost-to-cost
basis.
◍ A contractual arrangement whereby a franchisor
grants business rights and provides services to a
franchisee who in return agrees to pay an initial
franchise fee to operate a business and pay
continuing fees based on the operations of the
business. Answer: Franchise.
, ◍ The party who operates the franchised business. Answer: Franchisee.
◍ The party who grants business rights under the franchise. Answer:
Franchisor.
◍ A payment for establishing the franchise relationship
and providing some initial services. Answer: Initial franchise fee.
◍ When measuring the extent of progress under the percentage-of-
completion method, these are the costs incurred and labor hours worked
and other efforts devoted to a contract. Answer: Input measures.
◍ When measuring the extent of progress under the percentage-of-
completion method, these are the quantities or units completed on the
project (such as tons produced, floors of building completed, miles of
highway completed). Answer: Output measures.
◍ The accounting for long-term construction contracts where revenues,
costs, and gross profit are recognized as a company makes progress
toward completion of the contract based on the percentage of
completion. Answer: Percentage-of-completion method.
◍ A promise to provide a product or service to a customer. Answer:
Performance obligation.
◍ The principal's performance obligation is to provide
