Intermediate Accounting, 18th Edition, By Donald E
Intermediate Accounting, 18th Edition, by Donald E
Exam (elaborations)
Accounting Chapter 18 Wiley Questions - Test 2
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Intermediate Accounting, 18th Edition, by Donald E
Institution
Intermediate Accounting, 18th Edition, By Donald E
3. Describe the revenue recognition principle. - ANS 3. The revenue recognition principle indicates that revenue is recognized in the accounting period when a performance obligation is satisfied. That is, a company recognizes revenue to depict the transfer of goods or services to customers ...
Intermediate Accounting, 18th Edition, by Donald E
Intermediate Accounting, 18th Edition, by Donald E
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Accounting Chapter 18 Wiley
Questions - Test 2
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3. Describe the revenue recognition principle. - ANS 3. The revenue recognition principle
indicates that revenue is recognized in the accounting period when a performance obligation is
satisfied. That is, a company recognizes revenue to depict the transfer of goods or services to
customers in an amount that reflects the consideration that it receives, or expects to receive, in
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exchange for those goods or services.
4. Identify the five steps in the revenue recognition process. - ANS 4. The five steps in the
revenue recognition process are:
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1.Identify the contract(s) with customers.
2.Identify the separate performance obligations in the contract.
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3.Determine the transaction price.
4.Allocate the transaction price to the separate performance obligations.
5.Recognize revenue when each performance obligation is satisfied.
5. Describe the critical factor in evaluating whether a performance obligation is satisfied. - ANS
5. Change in control is the deciding factor in determining when a performance obligation is
satisfied. Control is transferred when the customer has the ability to direct the use of and obtain
substantially all the remaining benefits from the asset or service. Control is also indicated if the
customer has the ability to prevent other companies from directing the use of, or receiving the
benefit, from the asset or service.
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