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Unformatted text preview: ch05 Student: ___________________________________________________________________________ 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. True False 2. Under IFRS, revenue from product sales is recognized when the risks and rewards of ownership have been transferred to the customer. True False 3. The first disclosure note to the financial statements is typically the summary of significant accounting policies. True False 4. SAB 101 was issued by the FASB to clarify its guidelines on revenue recognition. True False 5. Use of the installment sales method requires that firms track the gross-profit percentage associated with a particular sale. True False 6. When collectibility of accounts receivable is difficult to estimate, companies must use the cost recovery method. True False 7. Use of the installment sales method indicates little uncertainty about collection of the receivable. True False 8. Over the life of a particular account receivable, the same total amount of gross profit is recognized under the installment method and the cost recovery method. True False 9. 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. True False 10. When the right of return exists and a seller cannot make reliable estimates of future returns, they can use the installment method. True False 11. Under the percentage-of-completion method, amounts billed and the cash actually received affect income recognition. True False 12. Under the percentage-of-completion method, the percent complete is often estimated by comparing the cost incurred to date with the total estimated cost to complete. True False 13. Firms have free choice as to whether they use the percentage-of-completion method or the completed contract method to account for a long-term contract. True False 14. Under IFRS, firms have free choice as to whether they use the percentage-of-completion method or the cost recovery method to account for a long-term contract. True False 15. The percentage-of-completion and completed contract methods calculate different amounts of total profit or loss for a particular contract. True False 16. Use of the percentage-of-completion method is dependent on a firm's ability to make dependable forecasts of future costs. True False 17. Under the completed contract method, gross profit or loss is never recognized until the contract is completed. True False 18. Under the cost recovery method used to account for long-term contracts under IFRS, equal amounts of revenue and cost are recognized until all costs are recovered....
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- Spring '10