Reference no: EM132478590

Question 1 - Company X sells running shoes for $110. Company X also sells running watches for $90. Additionally, Company X offers a package that includes both the shoes and the watch for $150.

How many performance obligations must be satisfied in Company X's packaged deal?

a) One

b) Two

c) Three

d) Not enough information

Question 2 - Company X sells running shoes for $110. Company X also sells running watches for $90. Additionally, Company X offers a package that includes both the shoes and the watch for $150.

What amount of the transaction price would be allocated to the running watch in each package?

a) $67.50

b) $82.50

c) $90

d) $150

Question 3 - Which of the following criteria does not necessarily require revenue to be recognized over a period of time?

a) The customer has control over the asset while the service is being performed.

b) The service is performed over time.

c) The service occurs over the period of more than one year.

d) The seller is producing a custom order and has an enforceable right to payment.

Question 4 - Company X sells a video game system for $300. Company X recently decided to start selling a package of the video game system and an online subscription to play online for one year for $350. Company X has not sold the online subscription before, so it does not have an estimate of its stand-alone selling price. Company X sold 500 packages on January 1.

How much should Company X record as sales revenue on January 1?

a) $12,500

b) $25,000

c) $150,000

d) $175,000

Question 5 - Company X sells a video game system for $300. Company X recently decided to start selling a package of the video game system and an online subscription to play online for one year for $350. Company X has not sold the online subscription before, so it does not have an estimate of its stand-alone selling price. Company X sold 500 packages on January 1.

How much sales revenue should Company X record each month during the year from the sale of the package?

a) $152.08

b) $1,042

c) $2,083

d) $25,000

Question 6 - Which of the following statements regarding revenue recognition is false?

a) It is only necessary to allocate the transaction price when multiple performance obligations are involved.

b) Both input- and output-based methods can be used to measure progress towards completion for revenue recognition.

c) In order for revenue to be recognized over a period, there must be multiple performance obligations for the company to satisfy.

d) Revenue should only be recognized at the time that each performance obligation is satisfied.

Question 7 - Company X sold 500 computers for $500 on January 1 for cash. How would Company X record this journal entry?

a) Debit Cash - Credit Deferred Revenue (Amount $250,000)

b) Debit Cash - Credit Sales Revenue (Amount $250,000)

c) Debit Account Receivable - Credit Deferred Revenue (Amount $250,000)

d) Debit Deferred Revenue - Credit Sales Revenue (Amount $250,000)

Question 8 - When should a company recognize revenue in a consignment arrangement?

a) When the consignee returns the goods to the consignor

b) When the consignor transfers the goods to the consignee

c) When the consignor pays the consignee for its services

d) When sale to a third party occurs

Question 9 - Which of the following is the correct journal entry to be made at the end of each period when upfront cash has been received and revenue is being recognized over a period of time?

a) Debit Cash - Credit Sales Revenue

b) Debit Cash - Credit Deferred Revenue

c) Debit Accounts Receivable - Credit Deferred Revenue

d) Debit Deferred Revenue - Credit Sales Revenue

Question 10 - When is a warranty treated as a performance obligation when dealing with revenue recognition?

a) A standard warranty is a performance obligation that should be satisfied by the seller.

b) A standard warranty should be treated as a performance obligation.

c) If an extended warranty is offered by the seller, it is the seller's performance obligation to satisfy.

d) A standard warranty is a performance obligation that should be satisfied by the manufacturer of the product that the warranty covers