5-1 Companies that engage in long-term salescontracts such as construction projects oftenuse the cost-to-cost method to recognizerevenue. This means that revenue isrecognized in proportion to the project'scompletion. Answer: True / FalseTopic: Sales on Consignment 5-2 A seller,acting as an agent for another company byselling the company's goods on consignment,recognizes the gross amount of the sale asrevenue. Answer: True / FalseTopic: Revenue Recognition 5-3 Bed Bath andBeyond has a return policy which states thatthe customer "may return a purchase for arefund, merchandise credit, or exchange toany of our stores nationwide or to our returnsprocessing center". The company can reportrevenue on the full amount as soon as themerchandise is sold.Answer: True / False

The construction companies use the cost to cost method where the cost would be paid on the…

5-1 Companies that engage in long-term sales contracts such as construction projects often use the cost-to-cost method to recognize revenue. This means that revenue is recognized in proportion to the project's completion Answer: True / False

5-1 Companies that engage in long-term sales contracts such as construction projects often use the cost-to-cost method to recognize revenue. This means that revenue is recognized in proportion to the project's completion Answer: True / False

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

18.2 The Five-Step Process Revisited When a revenue arrangement involves more than one performance obligation, which of the following conditions must be evaluated? O whether each product or service involved is distinct within the contract O whether revenue recognition is simultaneous for all products or services O whether the promises involved with each product or service are explicit or implicit O whether customary business practice dictates that the products and services be provided together Submit Answer Save for Later
Question 31 Revenue are considered to have been earned when: All possibility of return has expired. The selling company has substantially accomplished what it contracted to perform and collection from the customer is reasonably expected. The cash is collected. Goods have been shipped.
Multiple-Choice Question: 1. Using the contract-based approach, revenue is recognized for the sale of goods when the following conditions have been met: A. the seller no longer has control over the goods. B. all of these conditions are met. C. delivery of goods has occurred, consistent with terms of a real or implied contract, and any related performance obligation has been completed. D. the amount of revenue and costs can be reliably measured and it is probable the cash will be collected. Please explain for the answer, and why the rest is incorrect.
Question 3 An important inherent risk related to revenue transactions and revenue recognition: A. Timing of recognition. B. Executive incentive compensation. C. Amount of the sale. D. Tone at the Top.
Under the completed-contract method, Question 16 options: a revenue, cost, and gross profit are recognized at the time the contract is completed. b revenue and cost are recognized during the production cycle, but gross profit recognition is deferred until the contract is completed. c revenue, cost, and gross profit are recognized during the production cycle. d None of these answers are correct.
When percentage-of-completion accounting is not appropriate, U.S. GAAP requires the use of the completedcontract method, while IFRS requires the use of the cost recovery method. Explain how the two methods affectrecognition of revenue, cost of construction, and gross profit over the life of a profitable contract.