Revenue Recognition

Question 1

Errors made by the bank

Answer 1

such as the $200 error in the company’s favor, do not affect the book balance. They will be communicated to the bank, which will adjust its balance.

Question 2

The formula for a bank reconciliation is:

Answer 2

Book Balance =

Bank Statement Balance
+ Deposit in transits
– Outstanding checks
+/- bank errors.

Question 3

The core revenue recognition principle

Answer 3

1) revenue is to be recognized upon the transfer of promised goods and service to customers and
(2) the amount of revenue recognized represents the consideration the entity expects to receive in exchange for those goods and services.

Question 4

if the entity’s business model is to hold the asset to collect its scheduled cash flows and if those cash flows consist exclusively of principal and interest payments

Answer 4

record at amortized cost

Question 5

Under IFRS, financial liabilities are generally measured at

Answer 5

amortized cost

They may be measured at fair value, however, when it will result in more relevant information. IFRS does not provide for the election of a fair value option.

Question 6

assets

Answer 6

Idle machinery

Cash surrender value of life insurance on corporate executives

Allowance for decline in market value of debt securities available for sale

Question 7

reportable cash

Answer 7

= check BOOK balance

Question 8

when to recognize revenue

Answer 8

when a distinct performance obligation is satisfied. This occurs when the customer obtains control over the goods or services, usually when they are transferred

Question 9

compensating balance

Answer 9

min amount of money that’s required to be in bank, restricted.

compensating balances restricted deposit required by the bank