Question

1.Under a consignment arrangement, revenue is not recognized until the consigned goods are sold to a third party. True or False

2. Amounts received from the sale of gift cards should be recognized by the seller at the time of sale.--True or False

3. Ann Smith just saw her doctor. After the appointment, she was informed by the receptionist that the fee for the visit is $75 and that her insurance company will be billed for the visit. Ann was also notified that her insurance company will pay all of the fee except for the $20 co-pay, which she pays with her debit card right away. Because the doctor’s office has not entered into a contract, it would not record revenue until it verifies that the insurance company will pay.----True or False

4.Both public U.S. companies and companies reporting under IFRS were required to begin reporting revenue based on ASC Topic 606 in January 2018. Early adoption was permitted under both U.S. GAAP and IFRS.---True or False

5.Assuming that revenue related to a long-term construction project is properly recognize over time, the amount debited to “construction expense” each period is the actual construction costs incurred in that period.---True or False

6.A survey by Connor Group examining the financial statement impact of ASC 606 found that under the new standard, technology companies are more likely to recognize revenue over time than they did under prior GAAP.---True or False

7.Gamebox sells video-gaming devices, games, and online game subscriptions. The Gamebox system normally sells for $250 and comes prepackaged with one game. The average price for games is $30. The company also sells its online game subscription package, which allows members to download and play one new game per month, for $240. During the holiday season, the company provides a package deal which includes the gaming system with two games and a free one-year game subscription for $400. The company should allocate $192.92 of the $400 package purchase price to the gaming system.---True or False

8.Evans Equipment sells, installs, and maintains manufacturing equipment. The typical sales contract includes the purchase of the equipment, installation, and a five-year maintenance contract. Most customers choose to trade in the equipment for the new model at the end of the five-year contract. Evans Equipment should amortize the cost of installation over five years.---True or False

9.The underlying principal in ASC Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration expected to be exchanged for those goods or services.---True or False

10.Sell4U is an online site that allows its clients to post items for sale. Sell4U charges a 5% brokerage fee for use of the site, payable within 10 days of the sale. As an agent, Sell4U may recognize revenue for the brokerage fee as soon as an item is sold.-----True or False

Answer 1

1- True,Revenue is not recognised on consignment sales until performance has taken place. If the purchaser of goods on consignment has undertaken to sell the items on the seller's behalf, then revenue should not be recognised by the seller until the goods are sold to a third party.

2-False,The recognition of the sale of a gift card is straightforward. When a company sells a gift card, the cash it receives is recognized as a liability until the gift card is redeemed for goods or services. Upon redemption, then the company reverses the liability and recognizes the revenue

3- False Revenue is recognised when the two conditions are satisfied when service is complete of their is no uncertainity of recieving consideration in the given case the amount is debited from debit card means the hospital recieves the money hence they have to record revenue

4-False,ASC 606 is the new revenue recognition standard that affects all businesses that enter into contracts with customers to transfer goods or services – public, private and non-profit entities. Both public and privately held companies should be ASC 606 compliant now based on the 2017 and 2018 deadlines.

5-True as per accounting standard 7 in a construction contract the revenue is recorded on the basis of percentage of work completed

6-True,Under ASC Topic 606, a company will recognize revenue each time as it satisfies a performance obligation. These principles may result in very different patterns of revenue recognition compared to legacy GAAP. As an example, the new revenue recognition guidance eliminates the sell-through method.

7-False

8-True Prudence factor is applied here

9-True The core principle of Topic 606 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services

10-True