Allocating a transaction price to multiple performance obligations includes which of the following steps: O Complete each performance obligation before recognizing any revenue from the contract. O All of these choices are correct. O Consolidate the components of the contract to two performance obligations because a contract should not have more than two performance obligations. O Allocate the transaction price based on relative fair values.The best measure of fair value is what the good or service could be sold for on a standalone basis (standalone selling price).

Allocating a transaction price to multiple performance obligations includes which of the following steps: O Complete each performance obligation before recognizing any revenue from the contract. O All of these choices are correct. O Consolidate the components of the contract to two performance obligations because a contract should not have more than two performance obligations. O Allocate the transaction price based on relative fair values.The best measure of fair value is what the good or service could be sold for on a standalone basis (standalone selling price).

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter8: Revenue Recognition, Receivables, And Advances From Customers

Section: Chapter Questions

Problem 3Q

See similar textbooks

Similar questions

One of the more difficult issues that companies face in recognizing revenue is determining the transaction price. In cases where the consideration in a contract includes a variable amount, an entity should estimate the amount of consideration to which it is entitled in exchange for transferring the promised goods or services. Required: Discuss the methods a company may use to estimate variable consideration and the situations in which one method may he preferred over another.
Under the new revenue recognition guidance in ASC Topic 606, which of the following statements is true regarding contracts with customer options? In some cases where customers have an option to acquire additional goods or services, an evaluation is required to determine if the option creates an additional performance obligation. An additional performance obligation is created if the customer could obtain the same rights to additional goods or services without entering the contract. An additional performance obligation is created if the option provides the customer a right to purchase the goods or services at the stand-alone selling price for those goods or services. It is generally not considered a performance obligation when a retailer grants a "customer appreciation dividend" to a customer.
When a contract contains more than one performance obligation, the seller allocates the transaction price to each performance obligation in proportion to the relative stand-alone selling prices of those goods and services. according to the standard prices for the goods and any balance remaining is allocated to services. according to the amount of labor involved with each part of the contract. according to none of these choices.
I. PFRS 15 provides that where a contract with a customer has multiple performance obligations, an entity will allocate the transaction price to the performance obligations in the contract by reference to their relative standalone selling prices However, if a standalone selling price is not directly observable, the entity will need to estimate it. PFRS 15 suggests the following various methods to estimate the standalone selling price of each performance obligation, exceptA. NetRealizableValueApproachB. AdjustedMarketAssessmentApproach C. ExpectedCostPlusAMarginApproach D. ResidualApproach II. PFRS 15 provides that an entity recognizes revenue from contract with customer over time if anyof the following criteria is met, exceptA. The customer simultaneously receives and consumes all of the benefits provided by theentity as the entity performs.B. The entity's performance creates or enhances an asset that the customer controls as theasset is created.C. The entity has transferred physical…
Indicate whether each of the following statements is true or false. Farhgate Inc. should recognize revenue when the performance obligation has been satisfied and when cash is received. Answer If Massy sells its product but gives the buyer the right to return it, Massy should not recognize revenue until the sale is collected. Answer If it is difficult to determine the outcome of the contract (estimating costs and determining project revenue), IFRS requires the application of the zero-profit method. Answer
If a contract modification adds distinct goods or services and the contract price increases by an amount that reflects the stand-alone selling price of the added goods or services, then the contract modification should be accounted for By cumulative catch-up method. By prospective method. As a new separate contract. None of these choices.
Revenue should be recognized over time when a performance obligation is satisfied over time. That occursif (1) the customer consumes the benefit of the seller’s work as it is performed, (2) the customer controlsthe asset as the seller creates it, or (3) the asset has no alternative use to the seller and the seller can be paidfor its progress even if the customer cancels the contract
When there are potential multiple obligations within a single contract, and the products or services are highly interdependent and interrelated, then they are Question 1 options: sold separately. combined and reported as a single performance obligation. combined under a new contract. accounted for as separate performance obligations.
A contract modification always results in a new contract if the modification adds distinct goods or services at a price that reflects their stand-alone selling price. A. True B. False
If an entity recognises the revenue associated with a contract with a customer over time (rather than at a point in time), would this approach be considered more conservative than an approach that defers profit recognition until the completion of the contract (that is, at a future point in time)?
Does contract modification always result in a new contract if the modification adds distinct goods or services at a price that reflects their stand-alone selling price.
A company should recognize revenue when a. the revenue is earned b. die contract is signed c. the seller satisfies the performance obligation d. the consideration is received