Deferred RevenueTrue or false: A reduction of the deferred revenue account can be interpreted as a leading indicator of lower future revenues. ExplainOFalse. Revenue is recognized when the deferred revenue liability increases. If the deferred revenue account has decreased, more cash came in from customers and more revenue will be recognized in the future.OTrue. Revenue is recognized when the deferred revenue liability decreases. If the deferred revenue account has decreased, less cash came in from customers and less revenue will be recognized in the future.OFalse. Revenue is recognized when the deferred revenue liability decreases. If the deferred revenue account has decreased, less cash came in from customers and more revenue will be recognized in the future.OTrue. Revenue is recognized when the deferred revenue liability decreases. If the deferred revenue account has decreased, more cash came in from customers and less revenue will be recognized in the future.

Introduction:- Deferred revenue also known as Unearned Revenue. which means advance payments…

Answered: Deferred Revenue True or false: A…

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

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

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

Chapter6: Audit Evidence

Section: Chapter Questions

Problem 17RQSC

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Disregarding the special circumstances when bases other than the point of sale are used, discuss the advantages of each of the following objections to the point-of-sale basis of revenue recognition: (i) It is too conservative because revenue is earned throughout the entire process of production. (ii) It is not conservative enough because accounts receivable do not represent disposable funds, sales returns and allowances may be made, and collection and bad debt expenses may be incurred in a later period
Bias in revenue recognition would least likely be suspected if:A . the fi rm engages in barter transactions.B . reported revenue is higher than the previous quarter.C . revenue is recognized before goods are shipped to customers.
1. The company has an arregement under which revenue should be deferred, but it doesn't defer the revenue. Or, a company could defer to much revenue to shift income into future periods.
What does deferred revenue generally represent on the balance sheet? Amounts that have been invoiced to a customer but not yet recognized as revenue Unapplied customer payments Projected future revenues that have not been invoiced Refunds due to customers
Which one of the following statements about revenue is not correct?A. Revenue can result in increases in accounts receivableB. Revenue can result in increases in liabilitiesC. Revenue is earned whenever cash is received from a customerD. Revenue is earned when a service is provided to a customer
Recording bad debt expense under the allowance method will have what effect on the financial statements? Select one: a. Profit is unchanged and total assets decrease b. Profit decreases and total assets is unchanged c. Profit is unchanged and total assets is unchanged d. Profit increases and total assets decrease e. Profit decreases and total assets decrease
2. What is the revenue-recognition abuse identified in the article related to the percentage-of-completionmethod?3. Did revenue-recognition abuses tend to increase or decrease net income in the year they occurred?4. Did auditors tend to require their clients to make adjustments that reduced the revenue-recognition abusesthey detected?
The direct write-off method is generally not permitted for financial reporting purposes because a. Compared to the allowance method, it would allow greater flexibility to managers in manipulating reported net income.b. This method is primarily used for tax purposes.c. It is too difficult to accurately estimate future bad debts.d. Accounts receivable are not stated for the amount of cash expected to be collected.
Imagine that the auditor of QRS has expressed concerns that the bad debts expense recorded for the year is not high enough. What would be the impact on the reported value of the following items if the auditor requires an adjustment to be made? Select higher, lower or no effect from the drop down menu. Indicate higher/lower/no effect for: Cash Accounts Receivable Allowance for Doubtful Debts Bad debts expense Current Assets Net Profit
What is the financial impact on a company when a customer returns a product for a refund?a. Sales revenue will decrease because sales revenue will be debited.b. Sales revenue will not be impacted because the company has already accrued forestimated refunds and returns.c. Sales revenue will increase because sales revenue will be credited.d. Returns expense will increase because returns expense will be debited.
Which of the following is not a characteristic of non-counterbalancing error? Group of answer choices a.If the net income of one year is understated due to non-counterbalancing error, the net income of subsequent year is also affected. b.The statement of financial position of the year of non-counterbalancing error and succeeding statement of financial position are incorrect until the error is corrected. c.If not detected, this is not automatically corrected in the next accounting period. d.The income statement of the period in which the non-counterbalancing error is committed is misstated.
Which of the following is an example of a conservative accounting practice? a. Estimate the allowance for uncollectible accounts to be a larger amount.b. Do not write down inventory for declines in net realizable value (estimated selling price).c. Record a lower amount of depreciation expense in the earlier years of an asset’s life.d. Record sales revenue before it is actually earned.

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