M1- Financial Reporting and Disclosures

Question 1

What are the entries for Revenue Recognition?

Answer 1

Db. Cash/AR
Cr. Sales Revenue

(THINK - you always want to take “credit” for revenues)

Question 2

I am a STAR. What is I?

Answer 2

I: IDENTIFY the contract, which is an enforceable agreement

Question 3

I am a STAR. What is S?

Answer 3

S: Identify SEPARATE performance obiligations

Question 4

I am a STAR. What is T?

Answer 4

T: determine TRANSACTION price

Question 5

I am a STAR. What is A?

Answer 5

A: ALLOCATE the transaction price to separate performance obligations

Question 6

I am a STAR. What is R?

Answer 6

R: RECGONIZE revenue when or as the entity satisfies each performance obligation

Question 7

What is an example of the input method?

Answer 7

Resource consumption, labor hours

Question 8

What is an example of the output method?

Answer 8

milestones achieved

Question 9

When should you recognize revenue if you create a unquie product under a bill-and-hold agreement?

Answer 9

Recognize rev at the date the product is complete

Question 10

What happens to revenue when service contracts are sold?

Answer 10

Deferred rev increases and service rev doesn’t change

Question 11

What is a performance obligation?

Answer 11

A promise to transfer a good or service to a customer

Question 12

Warranties required by the state (or gov) aren’t…

Answer 12

performance obligations

Question 13

When selling a homogenous product (ex cookie cutter housing development) rev is recognized when?

Answer 13

At the closing date

(BC they could realistically sell it to someone else without changing the product)