CHAPTER 17
REVENUE RECOGNITION
TRUE-FALSE
1. The new revenue recognition standard adopts a liability approach as the basis for revenue
recognition.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
2. Revenue is recognized in the accounting period when the performance obligation is
satisfied.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Statement Preparation, IFRS: None
3. The first step in the revenue recognition process is to identify the separate performance
obligations in the contract.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
4. If the performance obligation is not highly dependent on, or interrelated with, other
promises in the contract, then each performance obligation should be accounted for
separately.
Ans: T, LO: 1, 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
5. Revenue from a contract with a customer cannot be recognized until a contract exists.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
6. A performance obligation is a written guarantee in a contract to provide a product or
service to a customer.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
7. Companies use the expected value, a probability-weighted amount, to estimate variable
consideration.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
8. When a sales transaction involves a significant financing component, the fair value is
determined either by measuring the consideration received or by discounting the payment
using an imputed interest rate.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Statement Preparation, IFRS: None
9. Companies rarely have to allocate the transaction price to more than one performance
obligation in a contract.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
,17 - 2 Test Bank for Intermediate Accounting, Eighteenth Edition
10. When a company sells a bundle of goods at a discount, the discount should be allocated to
the product that caused the discount and not to the entire bundle.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
11. A company recognizes revenue from a performance obligation over time by measuring the
progress toward completion.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
12. A company can only satisfy its performance obligations at a point in time.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
13. When a company sells a product but gives the buyer the right to return it, revenue should
not be recognized until the payment is collected.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
14. Warranties that the product meets agreed-upon specifications in the contract at the time
the product is sold are referred to as assurance-type warranties.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
15. Whether a contract modification is treated as a separate performance obligation or
prospectively, the same amount of revenue is recognized before and after the modification.
Ans: T, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Statement Preparation, IFRS: None
16. A contract liability is a company’s obligation to transfer goods or services to a customer for
which the company has received consideration from the customer.
Ans: T, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
*17. The most popular input measure used to determine the progress toward completion in
long-term contracts is the cost-to-cost basis.
Ans: T, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
*18. If the difference between the Construction in Process and the Billings on Construction in
Process account balances is a debit, the difference is reported as a current asset.
Ans: T, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
*19. The Construction in Process account includes only construction costs under the
percentage-of-completion method.
Ans: F, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
*20. Under the cost-recovery method, companies recognize costs only when the contract is
completed.
Ans: F, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
, Revenue Recognition 17 - 3
*21. The principal advantage of the cost-recovery method is that reported revenue reflects final
results rather than estimates.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
*22. Companies must recognize the entire expected loss on an unprofitable contract in the
current period under the percentage-of-completion method but not the cost-recovery
method.
Ans: F, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
*23. A loss in the current period on a profitable contract must be recognized under both the
percentage-of-completion and cost-recovery method.
Ans: F, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
*24. Neither the Billings account balance nor the Construction in Process account balance can
exceed the long-term contract price.
Ans: T, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
*25. The provision for a loss on an unprofitable contract can be combined with the Construction
in Process account balance under percentage-of-completion but not cost-recovery.
Ans: F, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
MULTIPLE CHOICE—Conceptual
26. To address inconsistencies and weaknesses in revenue recognition, a comprehensive
revenue recognition standard was developed entitled
a. Revenue Recognition Principle.
b. Principle-based Revenue Accounting.
c. Rules-based Revenue Accounting.
d. Revenue from Contracts with Customers.
Ans: D, LO: 1, Bloom: C, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control:
Financial Statement Preparation, IFRS: None
27. The converged standard on revenue recognition
a. reduces the number of disclosures required for revenue reporting.
b. increases the complexity of financial statement preparation.
c. recognizes and measures revenue based on changes in assets and liabilities.
d. simplify revenue recognition practices across entities and industries.
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control:
Financial Statement Preparation, IFRS: None
28. The first step in the process for revenue recognition is to
a. determine the transaction price.
b. identify the contract with customers.
c. allocate the transaction price to the separate performance obligations.
d. identify the separate performance obligations in the contract.
Ans: B, LO: 1, Bloom: C, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC: None,
IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
, 17 - 4 Test Bank for Intermediate Accounting, Eighteenth Edition
29. The second step in the process for revenue recognition is to
a. allocate the 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.
Ans: D, LO: 1, Bloom: C, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
30. The third step in the process for revenue recognition is to
a. determine the transaction price.
b. identify the separate performance obligations in the contract.
c. allocate the transaction price to the separate performance obligations.
d. recognize revenue when each performance obligation is satisfied.
Ans: A, LO: 1, Bloom: K, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC: None,
IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
31. The fourth step in the process for revenue recognition is to
a. recognize revenue when each performance obligation is satisfied.
b. identify the separate performance obligations in the contract.
c. allocate the transaction price to the separate performance obligations.
d. determine the transaction price.
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
32. The last step in the process for revenue recognition is to
a. allocate the transaction price to the separate performance obligations.
b. recognize revenue when each performance obligation is satisfied.
c. determine the transaction price.
d. identify the contract with customers.
Ans: B, LO: 1, Bloom: C, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC: None,
IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
33. A contract
a. must be in writing to be an enforceable contract.
b. is an agreement that creates enforceable rights and obligations.
c. is enforceable if each party can unilaterally terminate the contract.
d. does not need to have commercial substance.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control:
Financial Statement Preparation, IFRS: None
34. Revenue from a contract with a customer
a. is recognized when the customer receives the rights to receive consideration.
b. is recognized even if the contract is still wholly unperformed.
c. can be recognized even when a contract is still pending.
d. cannot be recognized until a contract exists.
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC: None,
IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
35. A contract between Boeing and Delta in which Boeing supplies planes to Delta
REVENUE RECOGNITION
TRUE-FALSE
1. The new revenue recognition standard adopts a liability approach as the basis for revenue
recognition.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
2. Revenue is recognized in the accounting period when the performance obligation is
satisfied.
Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Statement Preparation, IFRS: None
3. The first step in the revenue recognition process is to identify the separate performance
obligations in the contract.
Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
4. If the performance obligation is not highly dependent on, or interrelated with, other
promises in the contract, then each performance obligation should be accounted for
separately.
Ans: T, LO: 1, 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA
PC: None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
5. Revenue from a contract with a customer cannot be recognized until a contract exists.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
6. A performance obligation is a written guarantee in a contract to provide a product or
service to a customer.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
7. Companies use the expected value, a probability-weighted amount, to estimate variable
consideration.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
8. When a sales transaction involves a significant financing component, the fair value is
determined either by measuring the consideration received or by discounting the payment
using an imputed interest rate.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Statement Preparation, IFRS: None
9. Companies rarely have to allocate the transaction price to more than one performance
obligation in a contract.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
,17 - 2 Test Bank for Intermediate Accounting, Eighteenth Edition
10. When a company sells a bundle of goods at a discount, the discount should be allocated to
the product that caused the discount and not to the entire bundle.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
11. A company recognizes revenue from a performance obligation over time by measuring the
progress toward completion.
Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
12. A company can only satisfy its performance obligations at a point in time.
Ans: F, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
13. When a company sells a product but gives the buyer the right to return it, revenue should
not be recognized until the payment is collected.
Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
14. Warranties that the product meets agreed-upon specifications in the contract at the time
the product is sold are referred to as assurance-type warranties.
Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
15. Whether a contract modification is treated as a separate performance obligation or
prospectively, the same amount of revenue is recognized before and after the modification.
Ans: T, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Statement Preparation, IFRS: None
16. A contract liability is a company’s obligation to transfer goods or services to a customer for
which the company has received consideration from the customer.
Ans: T, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
*17. The most popular input measure used to determine the progress toward completion in
long-term contracts is the cost-to-cost basis.
Ans: T, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
*18. If the difference between the Construction in Process and the Billings on Construction in
Process account balances is a debit, the difference is reported as a current asset.
Ans: T, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
*19. The Construction in Process account includes only construction costs under the
percentage-of-completion method.
Ans: F, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
*20. Under the cost-recovery method, companies recognize costs only when the contract is
completed.
Ans: F, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
, Revenue Recognition 17 - 3
*21. The principal advantage of the cost-recovery method is that reported revenue reflects final
results rather than estimates.
Ans: T, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
*22. Companies must recognize the entire expected loss on an unprofitable contract in the
current period under the percentage-of-completion method but not the cost-recovery
method.
Ans: F, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
*23. A loss in the current period on a profitable contract must be recognized under both the
percentage-of-completion and cost-recovery method.
Ans: F, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
*24. Neither the Billings account balance nor the Construction in Process account balance can
exceed the long-term contract price.
Ans: T, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
*25. The provision for a loss on an unprofitable contract can be combined with the Construction
in Process account balance under percentage-of-completion but not cost-recovery.
Ans: F, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and
Control: Financial Statement Preparation, IFRS: None
MULTIPLE CHOICE—Conceptual
26. To address inconsistencies and weaknesses in revenue recognition, a comprehensive
revenue recognition standard was developed entitled
a. Revenue Recognition Principle.
b. Principle-based Revenue Accounting.
c. Rules-based Revenue Accounting.
d. Revenue from Contracts with Customers.
Ans: D, LO: 1, Bloom: C, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control:
Financial Statement Preparation, IFRS: None
27. The converged standard on revenue recognition
a. reduces the number of disclosures required for revenue reporting.
b. increases the complexity of financial statement preparation.
c. recognizes and measures revenue based on changes in assets and liabilities.
d. simplify revenue recognition practices across entities and industries.
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control:
Financial Statement Preparation, IFRS: None
28. The first step in the process for revenue recognition is to
a. determine the transaction price.
b. identify the contract with customers.
c. allocate the transaction price to the separate performance obligations.
d. identify the separate performance obligations in the contract.
Ans: B, LO: 1, Bloom: C, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC: None,
IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
, 17 - 4 Test Bank for Intermediate Accounting, Eighteenth Edition
29. The second step in the process for revenue recognition is to
a. allocate the 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.
Ans: D, LO: 1, Bloom: C, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
30. The third step in the process for revenue recognition is to
a. determine the transaction price.
b. identify the separate performance obligations in the contract.
c. allocate the transaction price to the separate performance obligations.
d. recognize revenue when each performance obligation is satisfied.
Ans: A, LO: 1, Bloom: K, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC: None,
IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
31. The fourth step in the process for revenue recognition is to
a. recognize revenue when each performance obligation is satisfied.
b. identify the separate performance obligations in the contract.
c. allocate the transaction price to the separate performance obligations.
d. determine the transaction price.
Ans: C, LO: 1, Bloom: C, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC:
None, IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
32. The last step in the process for revenue recognition is to
a. allocate the transaction price to the separate performance obligations.
b. recognize revenue when each performance obligation is satisfied.
c. determine the transaction price.
d. identify the contract with customers.
Ans: B, LO: 1, Bloom: C, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC: None,
IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
33. A contract
a. must be in writing to be an enforceable contract.
b. is an agreement that creates enforceable rights and obligations.
c. is enforceable if each party can unilaterally terminate the contract.
d. does not need to have commercial substance.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control:
Financial Statement Preparation, IFRS: None
34. Revenue from a contract with a customer
a. is recognized when the customer receives the rights to receive consideration.
b. is recognized even if the contract is still wholly unperformed.
c. can be recognized even when a contract is still pending.
d. cannot be recognized until a contract exists.
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, Min: 2, AACSB: None, AICPA BC: None, AICPA AC: Measurement Analysis and Interpretation, AICPA PC: None,
IMA: Reporting and Control: Financial Recordkeeping, IFRS: None
35. A contract between Boeing and Delta in which Boeing supplies planes to Delta
