INTERMEDIATE ACCOUNTING
3rd Edition
ISBN: 9780136946694
Author: GORDON
Publisher: RENT PEARS
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Textbook Question
Chapter 8, Problem 8.9MC
All of the following are indicators that the vendor is acting as an agent instead of as a principal except.
- a. The other party is primarily responsible for fulfilling the contract.
- b. The vendor has latitude in establishing prices for the other party’s goods or services.
- c. The vendor does not have inventory risk
- d. The vendor's consideration is in the form of a commission.
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t is generally agreed that sales revenue should only be ‘realized’ and so ‘recognized’ in the trading, profit and loss account when:1. The sale transaction is for a specific quantity of goods at a known price, so that the sales value of the transaction is known for certain.2. The sale transaction has been completed, or else it is certain that it will be completed (e.g. in the case of long-term contract work, when the job is well under way but not yet completed by the end of an accounting period).3. The critical event in the sale transaction has occurred. The critical event is the event after which: i) It becomes virtually certain that cash will eventually be received from the customer.ii) Cash is actually received.Usually, revenue is ‘recognized’i) When a cash sale is made.ii) The customer promises to pay on or before a specified future date, and the debt is legally enforceable.The prudence concept is applied here in the sense that revenue should not be anticipated, and included in the…
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Chapter 8 Solutions
INTERMEDIATE ACCOUNTING
Ch. 8 - What are the primary issues involved in revenue...Ch. 8 - What is the fundamental principle underlying the...Ch. 8 - What is the fundamental principle underlying the...Ch. 8 - Prob. 8.4QCh. 8 - Prob. 8.5QCh. 8 - How is a performance obligation defined?Ch. 8 - What are the two criteria to define a good or...Ch. 8 - Prob. 8.8QCh. 8 - What principles regarding timing and measurement...Ch. 8 - Prob. 8.10Q
Ch. 8 - What is variable consideration and what factors...Ch. 8 - Describe and contrast the two approaches used to...Ch. 8 - Prob. 8.13QCh. 8 - What factors should accountants consider to...Ch. 8 - Prob. 8.15QCh. 8 - How does a seller account for any consideration...Ch. 8 - Prob. 8.17QCh. 8 - What are the two exceptions to the general rule...Ch. 8 - What are the three criteria required to recognize...Ch. 8 - When an entity does not meet the three criteria...Ch. 8 - Prob. 8.21QCh. 8 - Prob. 8.22QCh. 8 - How does a firm estimate the degree completed...Ch. 8 - Can a firm record inventory out on consignment as...Ch. 8 - What method do agents in a transaction use to...Ch. 8 - Prob. 8.26QCh. 8 - What qualitative disclosures do the standards...Ch. 8 - All of the following are elements of a contract...Ch. 8 - Prob. 8.2MCCh. 8 - Telecom Co. enters into a two-year contract with a...Ch. 8 - The transaction price must reflect the time value...Ch. 8 - Prob. 8.5MCCh. 8 - When allocating the transaction price to separate...Ch. 8 - Which of the following indicators is not...Ch. 8 - During Yoar 1 Moriwothor Construction Company...Ch. 8 - All of the following are indicators that the...Ch. 8 - Prob. 8.10MCCh. 8 - Prob. 8.11MCCh. 8 - Identify a Contract with a Customer. Complete the...Ch. 8 - Prob. 8.2BECh. 8 - Identifying Performance Obligations. Perfect Party...Ch. 8 - Identifying Performance Obligations. Perfect Party...Ch. 8 - Estimating Variable Consideration. Gear Garage...Ch. 8 - Estimating Variable Consideration. Using the...Ch. 8 - Estimating Variable Consideration. Sellet...Ch. 8 - Estimating Variable Consideration. Seliet...Ch. 8 - Prob. 8.9BECh. 8 - Allocation of Transaction Price. Martin Software...Ch. 8 - Prob. 8.11BECh. 8 - Allocation of Transaction Price. Sycamore Sidewalk...Ch. 8 - Allocation of Transaction Price. Sycamore enters...Ch. 8 - Prob. 8.14BECh. 8 - Allocation of Transaction Price. Using the...Ch. 8 - When to Recognize Revenue. For each scenario...Ch. 8 - Prob. 8.17BECh. 8 - Prob. 8.18BECh. 8 - Prob. 8.19BECh. 8 - Prob. 8.20BECh. 8 - Sales with the Right of Return. Both incorporated...Ch. 8 - Sales with the Right of Return. Using the...Ch. 8 - Sales Returns. Historically, about 5% or the...Ch. 8 - Sales on Consignment. Hanna Lighting recertify...Ch. 8 - Determining Performance Obligations. Pagit Inc, a...Ch. 8 - Prob. 8.2ECh. 8 - Estimating Variable Consideration. King Rat Pest...Ch. 8 - Prob. 8.4ECh. 8 - Prob. 8.5ECh. 8 - Prob. 8.6ECh. 8 - Allocation of Variable Consideration. Green-Up Inc...Ch. 8 - Allocation of Variable Consideration. Green-Up Inc...Ch. 8 - Prob. 8.9ECh. 8 - Prob. 8.10ECh. 8 - Determination of When to Recognize Revenue. Far...Ch. 8 - Prob. 8.12ECh. 8 - Prob. 8.13ECh. 8 - Prob. 8.14ECh. 8 - Prob. 8.15ECh. 8 - Prob. 8.16ECh. 8 - Prob. 8.17ECh. 8 - Prob. 8.18ECh. 8 - Prob. 8.19ECh. 8 - Other Principal Agent Transactions, Net Revenue...Ch. 8 - Prob. 8.1PCh. 8 - Prob. 8.2PCh. 8 - Comprehensive Revenue Recognition Problem. Casale...Ch. 8 - Prob. 8.4PCh. 8 - Determining When to Recognize Revenue. Megrew...Ch. 8 - Prob. 8.6PCh. 8 - Prob. 8.7PCh. 8 - Prob. 8.8PCh. 8 - Prob. 8.9PCh. 8 - Prob. 8.10PCh. 8 - Prob. 8.11PCh. 8 - Prob. 8.12PCh. 8 - Prob. 1JCCh. 8 - Prob. 1FSCCh. 8 - Prob. 2FSCCh. 8 - Prob. 1SSCCh. 8 - Prob. 1BCC
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- Which of the following statements regarding contracts is incorrect?a. Identifying the contract with the customer is the first step of the revenue recognition model.b. A contract must be written to be valid.c. For a business that provides services, the performance obligation is generally satisfiedwhen the service provider has substantially completed the service for the customer.d. A contract is an agreement between two parties that creates enforceable rights orperformance obligations.arrow_forwardAccording to PAS 18 Revenue, which of the following is not a criterionto be satisfied before revenue from the sale of goods should be recognized inprofit or loss?a. Revenue can be reliably measuredb.Control over the goods sold has been relinquished but managementmaintainscontinuing involvement over the goods soldc. C The risks and rewards of ownership has been transferred to the buyerd. D The outcome of the transaction is probablearrow_forwardThe application of the lower of cost or market rule to inventory valuation is an example of a. the revenue realization principle b. the going concern assumption c. special industry practices d. conservatismarrow_forward
- 1. Under a consignment arrangement, the consignor recognizes net revenue equal to the gross sales price less the consignee's commission. True False 2. A consignor recognizes revenue when the consigned goods are transferred to the consignee. True False 3. If another party is primarily responsible for fulfilling a contract with a customer, this may indicate that the entity is an agent. True False 4. Pinewood Co. agrees to create artifcat for Saga Co. Pinewood is primarily liable for the artifact's conformance with the customer's specifications. Pinewood does not have the required expertise so its subcontracts Saleng Co. to do the manufacturing. If the entire manufacturing process is outsourced from Saleng Co., Pinewood would be acting as an agent of Saleng. True False 5. Fight Club Co. enters into a contract with Tough Co., a promoter of mixed martial arts (MMA) fights. Under the contract, Fight Club Co. purchases MMA event tickets from Tough at a negotiated price and resells them to…arrow_forwardUnder ASC Topic 606 for revenue recognition, which of the following factors is not an indicator of the principal/agent determination? A. Inventory risk. B. Credit risk. C. Shipping terms.arrow_forwardWhat is difference between accounting for a long-term contract and accounting for a more normal sale of inventory to a customer?arrow_forward
- The table below shows the financial process with corresponding significant account and relevant assertions. Each financial process shows what could go wrong (WCGW). Identify the relevant control to address each WCGW. Answers should be in not less than three sentences. Significant account and Relevant control to Financial Process What Could Go Wrong relevant assertion(s) address WCGW Purchase order is inappropriate because: the purchase order does not match a valid requisition; Purchases Trade accounts payable (EA) purchase is at incorrect price; or an inappropriate or authorized vendor is selected. Plant, equipment and leasehold Errors are made in the capitalization of fixed assets because: Property, plant and improvement, net (EAO) inappropriate items are capitalized; items are capitalized at equipment Land and Building, net (EAO) an inappropriate amount; or additions are not recorded. Answer with text and/or attachments:arrow_forwardWhich of the following accounts is an example of a contra-asset?A) Cost of Goods Sold B)Sales Discounts C) Purchases D) Deferred Revenue E) LIFO Reservearrow_forwardThe amount of consideration to which the entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties" is the definition of Select one: O a. the contract. O b. the performance obligation. O c. the transaction price. - O d. the consideration.arrow_forward
- Gross selling price includes: I. the amount of the seller's debt assumed by the buyer. II. the fair market value of services received by the seller from the buyer. Oa, Only statement II is correct. Ob. Only statement I is correct. Oc. Both statements are correct. Od. None of these statements are correct.arrow_forwardUnder PFRS 15, what is the specific point in time when the consignor satisfies is performance obligation under consignment contract? a. upon sale of consigned goods by consignee to final consumers b. upon signing of contract of consignment by consignor and consignee c. upon remittance of cash by consignee to consignor d. upon delivery of consigned goods by consignor to consigneearrow_forwardAccording to Topic 606, in order to have a contract with a customer on which revenue should be recognized, collectability must be: O a. Remote. b. Possible. c. Probable. Od. Uncertain,arrow_forward
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