In a perpetual inventory system,multiple performance obligations ________.
A) represent one distinct performance obligation
B) may require the creation of an asset account, Unearned Revenue
C) result in revenue being recorded when the separate performance obligations are identified because there is a binding contact
D) require the company to allocate the transaction price to each performance obligation

Question

Quizplus · Accepted Answer

In a perpetual inventory system, multiple performance obligations require the company to allocate the transaction price to each performance obligation. This is because each obligation may have a unique value or price attached to it, and therefore revenue must be recognized separately for each obligation. Option A is incorrect because multiple performance obligations represent distinct obligations that must be separately identified and recognized. Option B is incorrect because the creation of an asset account, Unearned Revenue, is not necessary in a perpetual inventory system, as revenue can be recognized as the obligations are fulfilled. Option C is incorrect because revenue cannot be recognized simply because there is a binding contract; separate performance obligations must still be identified and recognized as they are fulfilled.

In a Perpetual Inventory System,multiple Performance Obligations ________