chap005 - Chapter 5 Income Measurement True/False Questions...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 5 Income Measurement True/False Questions 1. Revenue is not recognized under the realization principle unless the earnings process is complete or virtually complete and there is reasonable certainty about collectibility of the asset received. Answer: True Learning Objective: 1 Level of Learning: 1 2. Under the percentage-of-completion method, amounts billed and the cash actually received affect income recognition. Answer: False Learning Objective: 4 Level of Learning: 1 3. The first disclosure note to the financial statements is typically the summary of significant accounting policies. Answer: True Learning Objective: 1 Level of Learning: 1 4. Estimated losses on long-term contracts are recognized ratably over the contract term regardless of the revenue recognition method used. Answer: False Learning Objective: 4 Level of Learning: 2 5. Use of the percentage-of-completion method is dependent on a firm's ability to make dependable forecasts of future costs. Answer: True Learning Objective: 4 Level of Learning 1 6. SAB 101 was issued by the FASB to clarify its guidelines on revenue recognition. Answer: False Learning Objective: 1 Level of Learning: 1 7. Use of the installment sales method indicates little uncertainty about collection of the receivable. Answer: False Learning Objective: 2 Level of Learning: 8. When the right of return exists, revenue can be recognized at the point of sale if the seller can make reliable estimates of future returns. Answer: True Learning Objective: 3 Level of Learning: 1 9. Recognition of franchise fee revenue is dependent on judgments of both substantial performance and fee collectibility. Answer: True Learning Objective: 5 Level of Learning: 2 10. Revenue from the sale of computer software is always recognized at the point of sale. Answer: False Learning Objective: 5 Level of Learning: 1 Spiceland/Sepe/Tomassini, Intermediate Accounting, Fourth Edition 155
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Chapter 5 Income Measurement 11. A decrease in the receivables turnover ratio indicates a decrease in the time between credit sales and cash collection. Answer: False Learning Objective: 6 Level of Learning: 2 12. The decomposition of return on assets illustrates why some companies with low profit margins can be very profitable if their asset turnover is high. Answer: True Learning Objective: 6 Level of Learning: 2 Matching Pair Questions Use the following to answer questions 13-17: 13-17. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase. Terms: A. Billings in excess of cost B. SOP 97-2 C. Sales revenue recorded D. Interim reports E. Long-term contract losses F. SAB 101 G. Realization principle H. SFAS 45 I. Unearned revenue J. Sales returns Phrases:
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern