Revenue Recognition
Scenario 1
Entity C sells land to Customer D. Customer D uses the land to construct a housing development. Customer D makes a non-refundable upfront payment of RM10,000 when legal title is transferred and RM990,000 in five years, which is when Customer D expects to have completed the development. Entity C has no history with this customer and the land is in an area currently not zoned for housing development. Thus, Entity C is not able to conclude that Customer D will pay more than the upfront payment. If Customer D fails to pay in five years, Entity C re-takes legal title to the land and any assets on the land.
How much revenue is recognised when Entity C transfers legal title of the land?
(a) Recognise revenue RM1,000,000 as the control of the land has been transferred. There is a long-term receivable of RM990,000.
(b) Recognise revenue of RM10,000 as this is a non-refundable payment and control of the land has transferred to the customer.
(c) Recognise no revenue as there is no contract with the customer due to the significant doubt about the customer’s ability and intention to pay
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Chapter 15: Revenue Exercise 15.10 Revenue recognition - rendering of services In each of the following...
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The Five-Step Revenue Recognition Model A. Step 1: Identify the Contract(s) with a Customer B. Step...
The Five-Step Revenue Recognition Model
A.
Step 1: Identify the Contract(s) with a Customer
B.
Step 2: Identify the Performance Obligations in the Contract
C.
Step 3: Determine the Transaction Price
D.
Step 4: Allocate the Transaction Price to the Performance
Obligations in
the Contract
E.
Step 5: Recognize Revenue When (or as) the Entity Satisfies
a
Performance Obligation
F.
Practical Expedients in Applying the Model
G.
Applying the Model to Contract Modifications
C3-1 Applying the 5-step model (LO 3-1)...
23. Which of the following items creates complications related to revenue recognition? A) Bonuses tied to...
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The general principle of income recognition establishes that companies recognize income when Select one: a. Control...
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QUESTION 1 Considering the risk of overstatement of receivables due to premature revenue recognition that inflates...
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Please help solve Regarding the new revenue recognition standards, which of the following statement is correct?...
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Chapter 15: Revenue Exercise 15.10 Revenue recognition - rendering of services In each of the following situations, state at which date(s), if any, revenue will be recognised. 1. A contract for the rendering of services is entered into on 1 May 2020. The services are delivered on 15 May 2020. The buyer pays for the services on 30 May 2020. 2. A contract for the rendering of services is entered into on 1 May 2020. The services are delivered continuously...
Under the revenue recognition principle, a good or service is considered transferred when A. all performance obligations have been specified B. the business has received cash from the customer OC. the customer obtains control of the good or service D. the transaction price has been agreed to
Which one of the following is not an indicator of the transfer of control to the buyer? 0 A. O B. Seller has present right to payment for the asset. Seller has legal title to the asset. C. Customer has accepted the asset. O D. Seller has transferred physical possession of property.
The Five-Step Revenue Recognition Model
A.
Step 1: Identify the Contract(s) with a Customer
B.
Step 2: Identify the Performance Obligations in the Contract
C.
Step 3: Determine the Transaction Price
D.
Step 4: Allocate the Transaction Price to the Performance
Obligations in
the Contract
E.
Step 5: Recognize Revenue When (or as) the Entity Satisfies
a
Performance Obligation
F.
Practical Expedients in Applying the Model
G.
Applying the Model to Contract Modifications
C3-1 Applying the 5-step model (LO 3-1)...
23. Which of the following items creates complications related to revenue recognition? A) Bonuses tied to sales goals B) Nonrefundable up-front fees C) Variable consideration D) Consignment goods E) All of the above 24. Costco Wholesale Corporation collects annual non-refundable membership fees from customers When should Costco recognize revenue for these membership fees? A) Immediately when cash is received because the fees are nonrefundable B) Evenly over the membership year C) Evenly over the current fiscal year D) At the...
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