Reference no: EM132841168
Questions -
Question 1 - Hubbard Ltd. (HL), an app developer, has a new game called Horsey that allows players to choose an avatar horse and travel through an imaginary world. A player can download the game for $10.99 and purchase stardust coins for $0.50 each. Stardust coins allow players to move faster through the world and accessorize their horse-avatar. HL recently started selling a bundled download for $50, in which a new player can download the game and receive 100 stardust coins. HL recognizes revenue on the download immediately and defers recognition of revenue from the stardust coins until they are used in the game. HL reports under ASPE. In fiscal 2020, HL sold 6,500 bundled downloads for $50 each.
What is the total amount of revenue that HL should recognize for game downloads in 2020 related to these sales?
A- $58,500
B- $71,435
C- $266,500
D- $325,000
Question 2 - Frank Construction Inc. (FCI) uses the percentage of completion method under ASPE to recognize revenue on its long-term construction contracts. In 2020, FCI agreed to build an office tower for Richmond Corp. for a total contract price of $160 million. The percentage of completion is most reliably measured through costs. The job was completed with the following information:
|
(in millions)
|
2020
|
2021
|
2022
|
|
Costs incurred to date
|
$50
|
$80
|
$140
|
|
Estimated remaining costs to complete
|
90
|
70
|
-
|
|
Billings to date
|
45
|
100
|
160
|
|
Collections during the year
|
40
|
35
|
85
|
What amount should be recognized as revenue in 2021?
A- $28.2 million
B- $35.0 million
C- $55.0 million
D- $85.3 million
Question 3 - Under ASPE, which of the following is an indicator that performance has been achieved by the seller?
A- Payment has been received from the customer.
B- There is persuasive evidence of an arrangement.
C- Delivery has been scheduled and terms are FOB destination.
D- The customer has the right to return the product within a reasonable time frame.
Question 4 - According to IFRS, which of the following is a consideration for the first step (identify the contract) in the five-step process to recognize revenue?
A- The terms of the contract need to be approved by one of the parties.
B- It is uncertain if the entity will collect the consideration that was exchanged for goods or services.
C- The transaction price of the contract is fixed.
D- The cash flow from the assets given up differs from that of the assets being received.
Question 5 - Lawson Ltd. (Lawson) entered into a contract to provide monthly consulting services to Xavier Inc. (Xavier). The contract is for 12 months and commenced on March 1. Lawson's year end is October 31. The total value of the contract is $120,000, and the services are to be provided evenly over the duration of the contract. Xavier paid the full amount on July 11.
Which of the following statements is true with respect to Lawson's October 31 financial statements, assuming Lawson reports under IFRS?
A- Lawson should record $40,000 as deferred revenue because the contract is not complete.
B- Lawson should record $80,000 as deferred revenue because that is the amount earned.
C- Lawson should record $120,000 as deferred revenue because the contract is not yet complete.
D- Lawson should record $120,000 as revenue because that is the amount of cash received.