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Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter9: Auditing The Revenue Cycle

Section: Chapter Questions

Problem 19MCQ

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I. In relation to the award credits, if the entity is collecting the consideration on its own account, it measures its revenue as the net amount retained on its own account, as the difference between the consideration allocated to the award credits and the amount payable to the third party for supplying the awards.

II. In accounting for award credits, if the entity is collecting the consideration on behalf of the third party, it measures its revenue as the gross consideration allocated to the award credits and recognises the revenue which has been allocated to the award credits when it fulfils its obligations in respect of the awards.

a. All statements are correct

b. 1st statement is incorrect while 2nd statement is correct

c. 2nd statement is incorrect while the 1st statement is correct

d. All statements are incorrect

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