中级财务会计题库 Chap004.docxVIP

Chapter 04 Income Measurement and Profitability Analysis True / False Questions1.Revenue is not recognized under the realization principle unless the earnings process is complete or virtually complete and there is reasonable certainty about the expected collection of the asset received. TRUE2.The first disclosure note to the financial statements is typically the summary of significant accounting policies. TRUE3.SAB 101 was issued by the FASB to clarify its guidelines on revenue recognition. FALSE4.Under IFRS, revenue from product sales is recognized when the risks and rewards of ownership have been transferred to the customer. TRUE 5.If the seller is a principal, the seller has primary responsibility for delivering a product or service. TRUE 6.If the seller is a principal, the seller typically is not vulnerable to risks associated with delivering the product or service. FALSE7.If the seller is a principal, the seller typically is vulnerable to risks associated with collecting payment from the customer. TRUE 8.If the seller is a principal, the seller should recognize gross revenue and cost of sales associated with the transaction. TRUE 9.If the seller is an agent, the seller typically is vulnerable to risk associated with delivering the product or service. FALSE 10.If the seller is an agent, the seller typically recognizes cost associated with the sale on its own line in the income statement. FALSE 11.Use of the installment sales method requires that firms track the gross profit percentage associated with a particular sale. TRUE 12.When the expected collection of accounts receivable is difficult to estimate, companies must use the cost recovery method. FALSE13.Use of the installment sales method indicates little uncertainty about collection of the receivable. FALSE14.Over the life of a particular account receivable, the same total amount of gross profit is recognized under the installment method and the cost recovery method. TRUE15.When the right of return exists, r