Farhgate Inc. should recognize revenue when the performance obligation has been satisfied and when cash is received. Answer If Massy sells its product but gives the buyer the right to return it, Massy should not recognize revenue until the sale is collected. Answer If it is difficult to determine the outcome of the contract (estimating costs and determining project revenue), IFRS requires the application of the zero-profit method. Answer
Farhgate Inc. should recognize revenue when the performance obligation has been satisfied and when cash is received. Answer If Massy sells its product but gives the buyer the right to return it, Massy should not recognize revenue until the sale is collected. Answer If it is difficult to determine the outcome of the contract (estimating costs and determining project revenue), IFRS requires the application of the zero-profit method. Answer
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Indicate whether each of the following statements is true or false.
Farhgate Inc. should recognize revenue when the performance obligation has been satisfied and when cash is received. Answer
If Massy sells its product but gives the buyer the right to return it, Massy should not recognize revenue until the sale is collected. Answer
If it is difficult to determine the outcome of the contract (estimating costs and determining project revenue), IFRS requires the application of the zero-profit method. Answer
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