Ch 18 and 19 conceptual

it is realized.

it is realizable.

it is realized or realizable and it is earned.

None of these answers are correct.

earned.

realized.

recognized.

All of these answers are correct.

earned.

realized.

recognized.

All of these answers are correct.

Revenue from selling products is recognized at the date of sale, usually interpreted to mean the date of delivery to customers.

Revenue from services rendered is recognized when cash is received or when services have been performed.

Revenue from permitting others to use enterprise assets is recognized as time passes or as the assets are used.

Revenue from disposing of assets other than products is recognized at the date of sale.

allocation.

articulation.

realization.

recognition.

service revenue.

deferred service revenue.

a reduction in installment accounts receivable.

a direct addition to retained earnings.

Realization has occurred.

The sale is the critical event.

Title legally passes from seller to buyer.

All of these are reasons to recognize revenue at the time of sale.

recording the sale, and accounting for returns as they occur in future periods.

not recording a sale until all return privileges have expired.

recording the sale, but reducing sales by an estimate of future returns.

All of these answers are correct.

payment was made by check.

the selling price is less than the normal selling price.

the buyer has a right to return the product and the amount of future returns cannot be reasonably estimated.

None of these answers are correct.

The amount of future returns can be reasonably estimated.

The seller's price is substantially fixed or determinable at time of sale.

The buyer's obligation to the seller would not be changed in the event of theft or damage of the product.

The buyer is obligated to pay the seller upon resale of the product.

the customer can avail the unit from a third party.

the arrangement includes a general right of repurchase relative to the delivered item.

the seller is the sole manufacturer of the separate unit.

performance of the undelivered item is in the control of the buyer.

Estimates of progress toward completion, revenues, and costs are reasonably dependable.

The contractor can be expected to perform the contractual obligation.

The buyer can be expected to satisfy some of the obligations under the contract.

The contract clearly specifies the enforceable rights of the parties, the consideration to be exchanged, and the manner and terms of settlement.

the terms of payment in the contract.

the degree to which a reliable estimate of the costs to complete and extent of progress toward completion is practicable.

the method commonly used by the contractor to account for other long-term construction contracts.

the inherent nature of the contractor's technical facilities used in construction.

Progress billings as deferred income, construction in progress as a deferred expense.

Progress billings as income, construction in process as inventory.

Net balance, as a current asset if debit balance, and current liability if credit balance.

Net balance, as income from construction if credit balance, and loss from construction if debit balance.

total costs incurred to date.

total estimated cost.

unbilled portion of the contract price.

total contract price.

As construction in process in the current asset section of the balance sheet.

As construction in process in the noncurrent asset section of the balance sheet.

As a receivable in the noncurrent asset section of the balance sheet.

In a note to the financial statements until the customer is formally billed for the portion of work completed.

is unacceptable for income tax purposes.

gives results based upon estimates which may be subject to considerable uncertainty.

is likely to assign a small amount of revenue to a period during which much revenue was actually earned.

None of these answers are correct.

revenue-percentage basis.

cost-percentage basis.

progress completion basis.

cost-to-cost basis.

reported revenue is based on final results rather than estimates of unperformed work.

it reflects current performance when the period of a contract extends into more than one accounting period.

it is not necessary to recognize revenue at the point of sale.

a greater amount of gross profit and net income is reported than is the case when the percentage-of-completion method is used.

revenue, cost, and gross profit are recognized during the production cycle.

revenue and cost are recognized during the production cycle, but gross profit recognition is deferred until the contract is completed.

revenue, cost, and gross profit are recognized at the time the contract is completed.

None of these answers are correct.

recognized in the current period, regardless of whether the percentage-of-completion or completed-contract method is employed.

recognized in the current period under the percentage-of-completion method, but the completed-contract method defers recognition of the loss to the time when the contract is completed.

recognized in the current period under the completed-contract method, but the percentage-of-completion method defers the loss until the contract is completed.

deferred and recognized when the contract is completed, regardless of whether the percentage-of-completion or completed-contract method is employed.

Under the completed-contract method, the loss is not recognized until the year the construction is completed.

Under the percentage-of-completion method, the gross profit recognized in the first year must not be changed.

Under the completed-contract method, when the billings exceed the accumulated costs, the amount of the estimated loss is reported as a current liability.

Under the completed-contract method, when the Construction in Process balance exceeds the billings, the estimated loss is added to the accumulated costs.

an established market with quoted prices.

low additional costs of completion and selling.

units are interchangeable.

All of these answers are correct.

Examples involve precious metals or farm equipment.

The products possess immediate marketability at quoted prices.

No significant costs are involved in selling the product.

All of these statements are true.

Automobiles

Large appliances

Single family residential units

Precious metals

Under both the percentage-of-completion and the completed-contract methods, the estimated cost increase requires a current period adjustment of excess gross profit recognized on the project in prior periods.

Under the percentage-of-completion method only, the estimated cost increase requires a current period adjustment of excess gross profit recognized on the project in prior periods.

Under the completed-contract method only, the estimated cost increase requires a current period adjustment of excess gross profit recognized on the project in prior periods.

No current period adjustment is required.

deduction from installment accounts receivable.

deduction from installment sales.

unearned revenue and classified as a current liability.

deduction from gross profit on sales.

collections in the year of sale do not exceed 30% of the total sales price.

an unrealized profit account is credited.

collection of the sales price is not reasonably assured.

the method is consistently used for all sales of similar merchandise.

provide no basis for the repossessed asset thereby recognizing a loss.

record the repossessed merchandise at fair value, recording a gain or loss if appropriate.

record the repossessed merchandise at book value, recording no gain or loss.

None of these answers are correct.

revenue, costs, and gross profit are recognized proportionate to the cash that is received from the sale of the product.

gross profit is deferred proportionate to cash uncollected from sale of the product, but total revenues and costs are recognized at the point of sale.

gross profit is not recognized until the amount of cash received exceeds the cost of the item sold.

revenues and costs are recognized proportionate to the cash received from the sale of the product, but gross profit is deferred until all cash is received.

recognition of the difference between the cash collected on installment sales and the cash expenses incurred.

recording the net income related to installment sales and recognizing the income as cash is collected.

deferring gross profit while recognizing operating or financial expenses in the period incurred.

deferring gross profit and all additional expenses related to installment sales until cash is ultimately collected.

At the time of completion of the equipment (completion of production method)

At the date of delivery (sales method)

The installment-sales method

The cost–recovery method

After all costs have been recovered, any additional cash collections are included in income.

Interest revenue may be recognized before all costs have been recovered.

The deferred gross profit is offset against the related receivable on the balance sheet.

Subsequent income statements report the gross profit as a separate item of revenue when it is recognized as earned.

income is recognized on a proportionate basis as the cash is received on the sale of the product.

income is recognized when the cash received from the sale of the product is greater than the cost of the product.

income is recognized immediately after the sale is made.

None of these answers are correct.

the seller recognizes revenue or income on the receipt of cash.

a company receives cash from the buyer before it transfers the goods or property.

the buyer reports the property as an asset on its balance sheet.

the seller has performed on the contract and a legitimate claim exists.

the product can be marketed at quoted prices and units are interchangeable.

cash is received before the sales transaction is complete.

the contract is short-term or the percentage-of-completion method can’t be used.

there are no significant costs of distribution.

is prohibited under current GAAP due to its conservative nature.

requires a company to defer profit recognition until all cash payments are received from the buyer.

is used by sellers when there is a reasonable basis for estimating collectibility.

recognizes total revenue and total cost of goods sold in the period of sale.

Cost-recovery method.

Percentage-of-completion method.

Deposit method.

Completed-contract method.

records the merchandise as an asset on its books.

records a liability for the merchandise held on consignment.

recognizes revenue when it ships merchandise to the consignor.

prepares an “account report” for the consignor which shows sales, expenses, and cash receipts.

service sponsor-retailer.

wholesaler-service sponsor.

manufacturer-wholesaler.

wholesaler-retailer.

as revenue when earned and receivable from the franchisee.

as revenue when received.

in accordance with the accounting procedures specified in the franchise agreement.

as revenue only after the balance of the initial franchise fee has been collected.

increase revenue recognized from the initial franchise fee by the amount of the expected future purchases.

record a portion of the initial franchise fee as unearned revenue which will increase the selling price when the franchisee subsequently makes the bargain purchases.

defer recognition of any revenue from the initial franchise fee until the bargain purchases are made.

None of these.

record the entire initial franchise fee as a deferred credit which will reduce the franchisor's investment in the purchased outlet when the option is exercised.

record the entire initial franchise fee as unearned revenue which will reduce the amount of cash paid when the option is exercised.

record the portion of the initial franchise fee which is attributable to the bargain purchase option as a reduction of the future amounts receivable from the franchisee.

None of these.

differs from accounting income due to differences in intraperiod allocation between the two methods of income determination.

differs from accounting income due to differences in interperiod allocation and permanent differences between the two methods of income determination.

is based on generally accepted accounting principles.

is reported on the corporation's income statement.

No No

No Yes

Yes Yes

Yes No

increase in balance of deferred tax asset minus the increase in balance of deferred tax liability.

increase in balance of deferred tax liability minus the increase in balance of deferred tax asset.

increase in balance of deferred tax asset plus the increase in balance of deferred tax liability.

decrease in balance of deferred tax asset minus the increase in balance of deferred tax liability.

Yes Yes

Yes No

No Yes

No No

Yes Yes

Yes No

No Yes

No No

pretax financial income will exceed taxable income in 2015.

Unruh will record a decrease in a deferred tax liability in 2015.

total income tax expense for 2015 will exceed current tax expense for 2015.

Unruh will record an increase in a deferred tax asset in 2015.

item II only

items I and II only

items II and III only

items I and IV only

permanent differences are not representative of acceptable accounting practice.

temporary differences occur frequently, whereas permanent differences occur only once.

once an item is determined to be a temporary difference, it maintains that status; however, a permanent difference can change in status with the passage of time.

temporary differences reverse themselves in subsequent accounting periods, whereas permanent differences do not reverse.

Prepaid expenses that are deducted on the tax return in the period paid.

Product warranty liabilities.

Depreciable property.

Fines and expenses resulting from a violation of law.

Subscriptions received in advance.

Prepaid royalty received in advance.

An installment sale accounted for on the accrual basis for financial reporting purposes and on the installment (cash) basis for tax purposes.

Interest received on a municipal obligation.

Expenses or losses that are tax deductible after they are recognized in financial income.

Revenues or gains that are taxable before they are recognized in financial income.

Revenues or gains that are recognized in financial income but are never included in taxable income.

Expenses or losses that are tax deductible before they are recognized in financial income.

a balance in the Unearned Rent account at year end.

using accelerated depreciation for tax purposes and straight-line depreciation for book purposes.

a fine resulting from violations of OSHA regulations.

making installment sales during the year.

proceeds from life insurance on officers.

interest expense on money borrowed to invest in municipal bonds.

insurance expense for a life insurance policy on officers.

All of these answers are correct.

Product warranty liabilities

Advance rental receipts

Installment sales

All of these will result in a temporary difference.

Permanent Asset

Permanent Liability

Temporary Asset

Temporary Liability

Temporary Liability

Temporary Asset

Permanent Liability

Permanent Asset

I and II only.

II only.

III only.

I and III only.

Interest received on municipal bonds.

Fines resulting from violating the law.

Premiums paid for life insurance on a company’s CEO when the company is the beneficiary.

Stock-based compensation expense.

handled retroactively in accordance with the guidance related to changes in accounting principles.

considered, but it should only be recorded in the accounts if it reduces a deferred tax liability or increases a deferred tax asset.

reported as an adjustment to income tax expense in the period of change.

applied to all temporary or permanent differences that arise prior to the date of the enactment of the tax rate change, but not subsequent to the date of the change.

it is probable that a future tax rate change will occur.

it appears likely that a future tax rate will be greater than the current tax rate.

the future tax rates have been enacted into law.

it appears likely that a future tax rate will be less than the current tax rate.

the establishment of a deferred tax liability.

the establishment of a deferred tax asset.

the establishment of an income tax refund receivable.

only a note to the financial statements.

consider all positive and negative information in determining the need for a valuation allowance.

consider only the positive information in determining the need for a valuation allowance.

take an aggressive approach in its tax planning.

pass a recognition threshold, after assuming that it will be audited by taxing authorities.

I, II, and III.

I and III only.

II only.

I only.

it is probable and can be reasonably estimated.

there is at least a 51% probability that the uncertain tax position will be approved by the taxing authorities.

it is more likely than not that the tax position will be sustained upon audit.

Any of the above exist.

better assessment of quality of earnings.

better predictions of future cash flows.

predicting future cash flows for operating loss carryforwards.

All of these answer choices are correct.

a current or long-term asset.

a current or long-term liability.

a contra-asset account.

All of these are acceptable methods of reporting deferred taxes.

as one net debit or credit amount.

in two amounts: one for the net current amount and one for the net noncurrent amount.

in two amounts: one for the net debit amount and one for the net credit amount.

as reductions of the related asset or liability accounts.

their expected reversal dates.

their debit or credit balance.

the length of time the deferred tax amounts will generate future tax deferral benefits.

the classification of the related asset or liability.

The reduction of the loss should be reported as a prior period adjustment.

The refund claimed should be reported as a deferred charge and amortized over five years.

The refund claimed should be reported as revenue in the current year.

The refund claimed should be shown as a reduction of the loss in 2015.

the net deferred tax consequences of temporary differences that will result in net taxable amounts during the next year.

totally eliminated from the financial statements if the amount is related to a noncurrent asset.

based on the classification of the related asset or liability for financial reporting purposes.

the total of all deferred tax consequences that are not expected to reverse in the operating period or one year, whichever is greater.

identify the types and amounts of existing temporary differences.

measure the total deferred tax liability for taxable temporary differences.

measure the total deferred tax asset for deductible temporary differences and operating loss carrybacks.

All of these are procedures in computing deferred income taxes.