1. Noncash consideration should be
a. recognized on the basis of fair value of what is given up.
b. recognized on the basis of original cost paid by customer.
c. recognized on the basis of fair value of what is received.
d. recognized on the basis of fair value of equivalent goods or services.
2. A company has satisfied its performance obligation when the
a. company has received payment for goods or services.
b. company has significant risks and rewards of ownership.
c. company has legal title to the asset.
d. company has transferred physical possession of the asset.
3. When sales are made with a right of return, the company
a. should not recognize any revenue.
b. should recognize revenue for the full sales price.
c. records the returned asset in a separate inventory account.
d. record the estimated returns in the Sales Returns account.
4. Consignments are a specialized marketing method whereby the
a. Consignee purchases goods for sale and sends payment when goods are sold.
b. Consignee (agent) holds title to the product.
c. Consignee pays for good up front and is paid when merchandise is sold.
d. Consignee takes possession of merchandise but title remains with manufacturer.
5. Contract liability is a company’s obligations to transfer goods or services to a customer for which the company has received consideration from the customer.An example of a contract liability is
a. Prepaid subscription.
b. Unearned magazine subscription.
c. Mortgage Payable.
d. Service Revenue.
6. The percentage-of-completion method
a. recognizes revenue and gross profit each period based upon progress.
b. is used primarily for short-term contracts.
c. accumulates construction costs in the Billings on Construction in Progress account.
d. recognizes revenue and gross profits only when contract is completed.