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Chapter6Revenuerecognitionissues
MultipleChoice
Identifythechoicethatbestcompletesthestatementoranswersthequestion.
1.Whichofthefollowingconditionsisnotrequiredtobesatisfiedtorecognizerevenue
fromthesaleofgoods?
a. Theenterprisehastransferredtothebuyerthesignificantrisksandrewardsof
ownershipofthegoods.
b. Theenterpriseretainsneithercontinuingmanagerialinvolvementtothedegree
usuallyassociatedwithownership,noreffectivecontroloverthegoodssold.
c. Thecashcorrespondingtothesaleofgoodshasbeencollected.
d. Theamountofrevenuecanbemeasuredreliably.
ANSWER:C
Moderate
POINTS: 0/1
REF:
page194
2.Asaleoncreditof100CUtakesplacethatcarriesa100%chancethatthesellerwill
needtoprovideadditionalcostsof10CUtwoyearsfromthedateofthesale.Whatis
recordedinthebalancesheetatthetimeofthesale?
a.
b.
c.
d.
ANSWER:C
Moderate
POINTS: 0/1
REF:
page195
3.Whichofthefollowingconditionsdoesnotneedtobesatisfiedinordertoreliably
estimatetheoutcomeofatransaction?
a. Theamountofrevenuethatwillbeobtaineduponcompletioncanbemeasured
reliably.
b. Thecashcorrespondingtothetransactionhasbeencollected.
c. Thestageorpercentageofcompletionofthetransactiononthebalancesheet
datecanbemeasuredreliably.
d. Thecostsincurredforthetransactionandthecoststocompletethetransaction
canbemeasuredreliably.
ANSWER:B
Moderate
POINTS: 0/1
REF:
page196
4.Whentheoutcomeofatransactioncannotbeestimatedreliably,anditisnotprobable
thatthecostsincurredwillberecovered,revenueshouldnotberecognized,andthe
costsincurredshouldberecognizedimmediatelyasanexpense.Whichaccounting
principleisputintopracticeinthiscase?
a. Matchingprinciple
b. Goingconcernprinciple
c. Principleofprudence
d. Accrualprinciple
ANSWER:C
Moderate
POINTS: 0/1
REF:
page197
5.Dividendsshouldberecognizedwhentheshareholdersrighttoreceivepaymentis
established.Thistakesplace:
a. Whenthebooksareclosed.
b. Whenthebusinessisliquidated.
c. Whentheboardofdirectorsdecidetodistributedividends.
d. Whenthedecisiontodistributedividendsismadeintheshareholdersgeneral
meeting.
ANSWER:D
Moderate
POINTS: 0/1
REF:
page197
6.Whichofthefollowingstatementsisfalse?
a. Permanentdifferencesdonotreversethemselvesovertime.
b. Incaseofpermanentdifferences,theaccountingandtaxapproachesgivethe
sameaftertaxincome.
c. Permanentdifferenceshavenofuturetaxconsequences.
d. Permanentdifferencesarelinkedtothedifferencesinthetimingofrevenueand
expenserecognitionbetweenaccountingandtaxrules.
ANSWER:D
Moderate
POINTS: 0/1
REF:
page202
7.Insomecountries,alatentgainonmarketablesecuritiesistaxableintheperiod
incurred,butisreportedunderfinancialaccountingonlyatthetimeofthesale.What
willbegeneratedbythistemporarydifference?
a. Deferredtaxliability
b. Deferredtaxrevenue
c. Deferredtaxasset
d. Deferredtaxexpense
ANSWER:C
Moderate
POINTS: 0/1
REF:
page206
8.Taxespayableaccountingconsistsinignoringatemporarydifferenceitrecognizes
incometaxexpenseinthefinancialstatementsforshareholdersasidenticaltothe
incometaxpayable.Thereisnolinkbetweenthetaxrecognizedandthetriggeringevent
andthusthisprincipleisinoppositiontothe______
a. Principleofprudence.
b. Accrualprinciple.
c. Goingconcernprinciple.
d. Matchingprinciple.
ANSWER:D
Easy
POINTS: 0/1
REF:
page209
9.Thecompletedcontractmethodandthepercentageofcompletionmethodareboth
usedfortherecognitionofincomepertainingtoalongtermcontract.Whendothese
methodsimplythatpotentiallossesonacontractarerecognized?
a. Whentheyincurred
b. Attheendofthecontract
c. Assoonastheycanbelegitimatelyestablished
d. Noneoftheabove
ANSWER:C
Moderate
POINTS: 0/1
REF:
page212
10.WhichofthefollowingcategoriesofgovernmentassistanceisnotspecifiedbyIAS20?
a. Contingentloans
b. Forgivableloans
c. Grantsrelatedtoincome
d. Grantsrelatedtoassets
ANSWER:A
Moderate
POINTS: 0/1
REF:
page221