Intermediate Accounting
1st Edition
ISBN: 9780132162302
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Textbook Question
Chapter 8, Problem 8.4BE
Identifying Performance Obligations. Perfect Party Company contracts with a customer to provide its birthday party package, including a cake, balloons, and musical entertainment. In addition, Perfect Party will host the event. Perfect Party commonly offers the musical entertainment when it hosts the party. However, it will provide the musical entertainment without hosting the party. Perfect Party often sells cakes and balloons separately that it delivers before a party. Identify the separate performance obligations in this contract.
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Under 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.
Companies provide information about performance obligations in contracts with customers, including information about ________.
Group of answer choices
liabilities exchanged
types of warranties but not obligations
types of warranties and obligations
return obligations but not refund obligations
Franchise revenue are recognized over time if:
a. Franchise rights are transferred with a right to use.b. The franchisor is providing initial services without any future obligations to be performed.c. The franchise fee is payable upon signing of the contract.d. The franchisor is providing ongoing services throughout the period of the contract.
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 - Prob. 8.8BECh. 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 - Prob. 8.3PCh. 8 - Determining When to Recognize Revenue. Megrew...Ch. 8 - Prob. 8.5PCh. 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. 1JCCh. 8 - Prob. 1FSACCh. 8 - Prob. 1SSCCh. 8 - Basis for Conclusions Case 1: Control According to...
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- A company should recognize revenue when a. the revenue is earned b. die contract is signed c. the seller satisfies the performance obligation d. the consideration is receivedarrow_forwardA contract between one or more parties creates: a. the date that cash is paid by the customer b. enforceable rights and obligations for the parties c. revenue for recognition d. the fixed amount of payments for the good or servicearrow_forwardTopic: REVENUE FROM CONTRACTS WITH CUSTOMERS Requirements: a. Identify the performance obligations in the contracts. b. How should the entity recognize revenue from the contract? (State also the timing of revenue recognition for each identified performance obligation.)arrow_forward
- The first step in the revenue recognition process is determining if a contract is in place between the seller and the customer. A contract is an agreement between two or more parties that creates enforceable rights and obligations. The standard states that a contract may be written, oral, or implied by customary business practices. To be a contract, the accounting standard states that it must meet five criteria. Required: Discuss the criteria necessary for a contract to be considered under the revenue recognition process. How would a company account for a contract that does not meet the criteria?arrow_forwardStep 1 of the "five-step model" states that certain conditions must be satisfied before an entity can account for a contract with a customer. Which of the following is not one of these conditions? Oa The entity and the customer have approved the contract and are committed to perform their contractual obligations. O b. The payment terms can be identified. O citis certain that the entity will collect the consideration to which it is entitled. Od. Each party's rights about the goods or services concerned can be identified.arrow_forwardA promotional item offered to buyers of specific products is called ________. Group of answer choices a service-type warranty an assurance-type warranty an accretion a premiumarrow_forward
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- Under PFRS 15, what is the specific point in time when the consignor satisfies its performance obligation under consignment contract? Upon remittance of cash by consignee to consignor. Upon delivery of consigned goods by consignor to consignee. Upon signing of contract of consignment by consignor and consignee. Upon sale of consigned goods by consignee to final consumers.arrow_forwardAt what point does revenue recognition occur? A. When the purchase order is received B. When the seller receives the money for the job C. When the seller has met performance D. When the purchaser makes paymentarrow_forwardUse the following information for the next three questlons: Entity A, a manufacturing entity, obtains insurance against product liability from Entity B, an insurance company. Entity B then cedes the insurance contact with Entity C, another insurance company. 1. How does Entity B account for the insurance contract with Entity A? General model Premium Allocation Approach Ca or b d. Not accounted for under PFRS 17 How does Entity C account for the insurande contract ceded by Entity B? General model Premium Allocation Approach a or b d. Modification to general model för reinsurance contracts held 3 How does Entity B account for the insurance contract ceded to Entity C General modet Premium Allocation Approach a or Modification to geheral model for reinsurance contracts heldarrow_forward
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