Question 1

When there is a continuous earnings process, but the progress towards completion is not measurable, ASPE requires the use of the

Accepted Answer

The answer of When there is a continuous earnings process,...

Question 2

The concept of commercial substance in purchase and sales transactions means that

Accepted Answer

The answer of The concept of commercial substance in purchase...

Question 3

When a contract becomes unprofitable to an entity, this is called a(n)

Accepted Answer

An onerous contract is one where the costs to fulfill the contract exceed the expected revenue, making it unprofitable for the entity. Uncompleted contracts refer to contracts that have not yet been fulfilled, zero-profit contracts refer to contracts where the entity does not make a profit but also does not take a loss, and unenforceable contracts are contracts that are not binding or cannot be enforced by law.

Question 4

When a sale involves goods and services, the selling price should NOT be

Accepted Answer

The answer of When a sale involves goods and services,...

Question 5

If an entity sells on credit, the risk that the customer will not pay is called

Accepted Answer

Credit risk refers to the potential loss that a company may face due to the failure of its customers to make payments for the goods or services purchased on credit.

Question 6

In many cases, an entity may have an implicit obligation even if it is not explicitly noted in a sales contract.This is called a(n)

Accepted Answer

The answer of In many cases, an entity may have...

Question 7

The actions a company takes to add value are referred to as the

Accepted Answer

The actions a company takes to add value are typically referred to as the earnings process. This refers to the various strategies, initiatives, and investments a company makes to increase its revenue, profits, and overall value to stakeholders. While the other options may be relevant concepts in finance and business, they do not specifically relate to the actions a company takes to add value.

Question 8

Which of the following would NOT normally be considered as a problem associated with the earnings approach to revenue recognition?

Accepted Answer

The statement "Revenue can be reliably measured and collectability is probable" is actually a condition that supports revenue recognition, not a problem associated with it.

Question 9

When a vendor is exposed to continued risks of ownership because of potential return of the product, which of the following accounting procedures should NOT be used?

Accepted Answer

Ignoring future returns would not accurately reflect the potential liabilities and would misstate revenue and profit.

Question 10

If the earnings process has a critical event, it is often referred to as a

Accepted Answer

The answer of If the earnings process has a critical...

Question 11

Terms negotiated by a party to the contract that are more favourable than normal are called

Accepted Answer

Concessionary terms are negotiated terms that are more favorable than normal. Credit terms refer to the payment terms for a purchase, barter transactions involve the exchange of goods or services without the use of money, and arm's length terms indicate that the parties are dealing with each other at arms-length, meaning without any special relationship or influence.

Question 12

Measurement uncertainty does NOT arise from

Accepted Answer

Measurement uncertainty does not arise from the ability to measure the outcome of the transaction, as this implies that the measurement is certain and clear.

Question 13

Under ASPE, the profession requires that the percentage-of-completion method be used when certain conditions exist.Which of the following is NOT one of those necessary conditions?

Accepted Answer

The answer of Under ASPE, the profession requires that the...

Question 14

Under IFRS, when a vendor gives a volume rebate to a customer, the vendor should account for it as a(n)

Accepted Answer

Under IFRS, a volume rebate is considered a reduction of revenue because it reduces the amount of revenue earned from the initial sale. This is because the rebate is contingent upon the customer reaching a certain volume of purchases, so it is not guaranteed at the time of the initial sale. Therefore, it cannot be treated as a reduction of the cost of goods sold or as an expense.

Question 15

Under the earnings approach for the sale of goods, which of the following would NOT be a reason to recognize revenue?

Accepted Answer

Under the earnings approach, revenue is recognized when the vendor no longer has control over the goods sold. If the vendor continues to have control, revenue should not be recognized.

Question 16

When a company sells goods, there is often one main act in the earnings process that signals substantial completion or performance.This is called the

Accepted Answer

The answer of When a company sells goods, there is...

Question 17

Under ASPE, when work to be done and costs to be incurred on a long-term contract can be estimated reliably, which of the following methods of revenue recognition is preferable?

Accepted Answer

The answer of Under ASPE, when work to be done...

Question 18

Under ASPE, when selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be

Accepted Answer

The answer of Under ASPE, when selecting an accounting method...

Question 19

A credit that is realized through an entity's ordinary activities would be treated as

Accepted Answer

Revenue is recognized through an entity's ordinary activities, and a credit realized through those activities would also be considered revenue. Gains typically involve the sale of assets outside of an entity's ordinary activities, other income refers to non-operating income, and other comprehensive income includes items such as unrealized gains or losses on available-for-sale securities.

Question 20

Under the percentage-of-completion method, how should the balances of progress billings and construction in process be disclosed in the financial statements prior to the completion of the contract?

Accepted Answer

The answer of Under the percentage-of-completion method, how should the...

Quiz 1: Intermediate Accounting Volume 1