Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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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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3.
(a) In performing a contract of sale of goods, there may be a situation where
the seller fails to deliver the goods in the agreed quantity. Discuss the
rights of the buyer upon such failure.
(10)
Choose the best answer.
1.Under a consignment arrangement, the consignor recognizes net revenue equal to the gross sales price less the consignee's commission. *
a.True
b.False
2.A consignor recognizes revenue when the consigned goods are transferred to the consignee. *
a.True
b.False
3.If another party is primarily responsible for fulfilling a contract with a customer, this may indicate that the entity is an agent. *
a.False
b.True
4.Pinewood Co. agrees to create an 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. *
a.True
b.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…
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…
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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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- 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.arrow_forwardFor sellers of goods, the revenue recognition principle generally requires that revenues be recorded when the following conditions are met: The item is manufactured When the goods are received by the buy The sales order is received ● When title and risks of ownership pass to the buyer.arrow_forwardWhich of the following conditions would support recognition of revenue? The seller’s price to the buyer is being negotiated. Delivery has occurred or services have been provided. Collection is possible. Significant risks and rewards of ownership of the goods will soon be transferred to the purchaser by the seller.arrow_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 the new revenue recognition guidance in ASC Topic 606, which of the following statements is true regarding contracts with customer options? In some cases where customers have an option to acquire additional goods or services, an evaluation is required to determine if the option creates an additional performance obligation. An additional performance obligation is created if the customer could obtain the same rights to additional goods or services without entering the contract. An additional performance obligation is created if the option provides the customer a right to purchase the goods or services at the stand-alone selling price for those goods or services. It is generally not considered a performance obligation when a retailer grants a "customer appreciation dividend" to a customer.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_forward
- What is difference between accounting for a long-term contract and accounting for a more normal sale of inventory to a customer?arrow_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_forwardRequirement a. What are the accounting requirements for a correct sales cutoff? A. A shipment should be recorded as a sale when the risks of ownership transfer to the buyer and collectability is reasonably assured. B. A shipment should be recorded as a sale when the merchandise is shipped. C. A shipment should be recorded as a sale when the payment for the merchandise has beeb received by the seller. D. A shipment should be recorded as a sale when the merchandise is received by the purchaser.arrow_forward
- One such issue is the Sale with Right of Return. Discuss how do you recognize revenue when the customer has the right to returnarrow_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_forwardCompanies recognize revenue when goods or services are transferred to customers for the amount the company expects to be entitled to receive in exchange for those goods or services. That core principle is implemented by (1) identifying a contract with a customer, (2) identifying the performance obligations in thecontract, (3) determining the transaction price of the contract, (4) allocating that price to the performanceobligations, and (5) recognizing revenue when (or as) each performance obligation is satisfiedarrow_forward
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