Question

1. Revenue from a contract with a customer

a. cannot be recognized even if the performance obligation has been satisfied.

b. is recognized when the customer exercises its right to provide consideration.

c. cannot be recognized until a contract exists.

d. is recognized even if the contract is wholly unperformed.

2. Saler Company entered into two contractual agreements with two customers. Customer 1 agreed to buy 5,000 units of Product X11 per month for 24 months at $25 per unit. Customer 2 agreed to purchase advisory services for 12 months at $16,000 per month. Both customers agreed to modify their contracts after 6 months had passed.

I.	If Customer 1 decides to buy more than 5,000 units in any given month, the price will be $21 for the additional units, which is representative of the stand-alone price for this product in similar situations.
II.	Customer 2 agrees to extend the period of time for advisory services to 15 months at the same price and to purchase 2,000 units of Product X11 per month for the next nine months at $15 per unit.

Which of these contract modifications creates a separate contract?

a. I only

b. Both I and II

c. Neither I nor II

d. II only

3. When a company is determining its dividend policy, the company must adhere to legal requirements. The legal requirements are determined by

a. the state in which the company was incorporated

4.

The Michael Company's stockholders' equity accounts have the following balances as of December 31, 2016:

Common stock, $20 par (25,000 shares issued of which
2,000 are being held as treasury stock)		$ 500,000
Additional paid-in capital		750,000
Retained earnings		2,250,000
		$3,500,000
Less: Treasury stock (2,000 shares at cost)		(120,000)
	Total stockholders' equity	$3,380,000

On January 2, 2017, the board of directors of Michael declared a 10% stock dividend to be distributed on February 15, 2017. The market price of Michael Company's common stock was $75 per share on January 2, 2017. On the date of declaration, the retained earnings account should be decreased by

zero; only a memorandum entry is required.

$187,500.

$50,000.

$172,500.

b. the Financial Accounting Standards Board (FASB)

c. the Federal Trade Commission (FTC).

d. the Securities and Exchange Commisison (SEC).

Answer 1

1) Solution: cannot be recognized until a contract exists.

Explanation: Revenue from a contract can be recognized after the existence of the contract

　

2) Solution: I only

Explanation: The goods that added are sold in modification I are distinct; and the price in the contract depicts the standalone selling price, thus causing it to be separate contract

　

3) Solution: state in which the company was incorporated

Explanation: The Company’s legal requirements are determined by the state in which it is incorporated

　

4) Solution: $172,500

Explanation: Dividend = (25000 shares - 2000 shares) * 75 * 10% = 172,500