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This Study Resource Was: Advanced Accounting Ifrs 15
This Study Resource Was: Advanced Accounting Ifrs 15
IFRS 15
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3. Arrange following steps in revenue recognition process to the proper order:
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I. Determine the transaction price
II. Identify the contract with the customer
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III.
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Allocate the transaction price to the separate performance obligations
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IV. Identify the separate performance obligations in the contract
V. Recognize revenue when each performance obligation is satisfied
A. Not recorded until one or both parties perform under the contract
B. Recorded at the time the contract is approved by both parties
C. Not recorded until both parties perform under the contract
D. Recorded immediately after the contract is signed
6. A contract:
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7. On January 15, 2015, AA Company enters into a contract to build custom equipment for
BB Company. The contract specified a delivery date of March 1. The equipment was not
delivered until March 31. The contract required full payment of P150,000 30 days after
delivery. This contract should be:
8. CC Computers manufactures and sells pagers and radio paging systems which include a
180-day warranty on product defects. It also sells an extended warranty which provides
an additional two years of protection. On May 10, it sold a paging system for P4,620 and
an extended warranty for another P1,440. The journal entry to record this transaction
would include:
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D. A credit to unearned service revenue of P1,440
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9. DD Inc. manufactures and sells stereo systems that include an assurance-type warranty
for the first 90-days. DD also offers an optional extended coverage plan under which it
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will repair or replace any defective part for 2 years beyond the expiration of the
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assurance-type warranty. The total transaction price for the sale of the stereo system and
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the extended warranty is P3,600. The standalone price of each is P2,760 and P960,
respectively. The estimated cost of the assurance warranty is P420. The accounting for
warranty will include a:
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10. On July 31, EE Company contracted to have two products built by FF Company for a
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total of P222,000. The contract specifies that payment will only occur after both products
have been transferred to EE Company. EE determines that the standalone prices are
P120,000 for Product 1 and P102,000 for Product 2. On August 1, when product 1 has
been transferred, the journal entry to record this event include a:
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11. GG Builders enters into a contract with a customer to build a warehouse for P1,020,000
on March 30, 2015 with a performance bonus of P60,000 if the building is completed by
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July 31, 2015. The bonus is reduced by P12,000 each week that completion is delayed.
GG Builders commonly includes these completion bonuses in its contract and based on
prior experience, estimates the following completion outcomes:
A. P1,074,000
B. 1,020,000
C. 663,000
D. 702,000
12. On June 1, 2015, HH Company sold equipment to II Company. In exchange for a zero-
interest bearing note with a face value of P66,000, with payment due in 12 months. The
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fair value of the equipment on the date of sale was P60,000. The amount of revenue to
be recognized on this transaction in 2015 is:
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A. P66,000
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B. 6,000 rs e
C. 60,000
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D. 60,000 sales revenue and 3,500 interest revenue
13. JJ Auto Parts sells parts to KK Car Repair during 2015. JJ offers rebates of 2% on
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purchases for the year exceed P120,000. In the past, KK normally purchases P180,000
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in parts during a calendar year. On March 25, 2015, KK Car Repair purchased P44,400
of parts. The journal entry to record the sale includes a:
14. Zuellig Pharmaceuticals entered into a licensing agreement with Janitor Lab for a new
drug under development. Zuellig will receive P8,100,000 if the new drug receives BFAD
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approval. Based on prior approval, Zuellig determines that it is P85% likely that the drug
will gain approval. The transaction price of this arrangement should be:
A. P8,100,000
B. 6,885,000
C. 1,215,000
D. P0 until approval is received
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installation and training for a total cost of P144,000 on March 15, 2014. Estimated
standalone fair values of the equipment, installation and training are P90,000, P60,000
and P30,000, respectively. The transaction price allocated to equipment, installation and
training is:
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A. Credit to sales revenue for P144,000
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B. Debit to unearned service revenue of 30,000
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C. Credit to unearned service revenue of 24,000
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D. Credit to service revenue of 60,000
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17. Swimming Pool Company sells all fabricated pools that cost P120,000 to customers for
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P216,000. The sales price includes an installation fee, which is valued at P30,000. The
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fair value of the pool is P192,000. The installation is considered a separate performance
obligation and is expected to take 3 months to complete. The transaction price allocated
to the pool and the installation is:
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18. Taster’s Choice sells natural supplements to customers with an unconditional right of
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return if they are not satisfied. The right of returns extends 60 days. On February 10,
2014, a customer purchases P3,600 of products (cost P1,800). Assuming that based on
prior experience, estimated returns are 20%, the journal entry to record the sale and cost
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19. Taster’s Choice sells natural supplements to customers with an unconditional right of
return if they are not satisfied. The right of returns extends 60 days. On February 10,
2014, a customer purchases P3,600 of products (cost P1,800). Assuming that based on
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prior experience, estimated returns are 20%, the journal entry to record the return of
P240 of merchandise includes a:
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franchise opens
D. The franchise fee is payable upon signing of contract
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22. Franchise revenue are recognized over time if:
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A.
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Franchise rights are transferred at a point in time
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B. The franchise fee is payable upon signing of contract
C. Performance obligations regarding the franchise rights are completed when the
franchise opens
D. None of the above
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23. Cerette, Inc. charges an initial franchise fee of P90,000 broken down as follows:
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Upon signing of the agreement, a payment of P40,000 is due. Thereafter, two annual
payments of P30,000 are required. The credit rating of the franchisee is such that it
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would have to pay interest of 8% to borrow money. The franchise agreement is signed on
August 1, 20x7, and the franchise commences operation on November 1, 20x7.
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Assuming that no further services are required by the franchisor once the franchise
begins operations, the entry on November 1, 20x7 would include:
24. Cerette, Inc. charges an initial franchise fee of P90,000 broken down as follows:
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Training services 11,500
Equipment (cost of P10,800) 38,500
Total initial franchise fee P90,000
Upon signing of the agreement, a payment of P40,000 is due. Thereafter, two annual
payments of P30,000 are required. The credit rating of the franchisee is such that it
would have to pay interest of 8% to borrow money. The franchise agreement is signed on
August 1, 20x8, and the franchise commences operation on November 1, 20x8.
Assuming that that the total training fees includes training services for the period leading
up to the franchise opening (P5,500 value) and for 3 months following opening. The
journal entry on August 1, 20x8 would include:
25. Xaviery enters into a franchise agreement on December 31, 20x7, giving a franchisee
the rights to operate a Xaviery franchise in Cagayan Valley for five (5) years. Xaviery
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charges an initial franchise fee of P975,000 for the right to operate as a franchisee,
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payable upon signing the contract. The franchisor also receives ongoing royalty
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payments of 7% of the franchisee’s annual sales (payable each January 15 of the
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following year).
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The amount of franchise revenue on December 31, 20x7 amounted to:
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A. Nil
B. 195,000
C. 975,000
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D. 1,043,250
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26. Using the same information in No. 25, the franchise revenue on December 31, 20x8,
franchise begins operations in January 20x8 and records P16,575,000 of revenue for the
year ended December 31, 20x8:
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A. P195,000
B. 1,160,250
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C. 1,355,250
D. 1,755,000
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-end-
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