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Multiple ChoiceIdentify the choice that best completes the statement or answers the question.
1. Which of the following conditions is not required to be satisfied to recognize revenuefrom the sale of goods?a. The enterprise has transferred to the buyer the significant risks and rewards of
ownership of the goods.b. The enterprise retains neither continuing managerial involvement to the degree
usually associated with ownership, nor effective control over the goods sold.c. The cash corresponding to the sale of goods has been collected.d. The amount of revenue can be measured reliably.
ANSWER: CModerate
POINTS: 0 / 1REF: page 194
2. A sale on credit of 100 CU takes place that carries a 100% chance that the seller willneed to provide additional costs of 10 CU two years from the date of the sale. What isrecorded in the balance sheet at the time of the sale?
a.
b.
c.
d.
ANSWER: CModerate
POINTS: 0 / 1REF: page 195
3. Which of the following conditions does not need to be satisfied in order to reliablyestimate the outcome of a transaction?a. The amount of revenue that will be obtained upon completion can be measured
reliably.b. The cash corresponding to the transaction has been collected.
Name: Score: 0 / 10 points (0%)
Chapter 6 Revenue recognition issues
c. The stage or percentage of completion of the transaction on the balance sheetdate can be measured reliably.
d. The costs incurred for the transaction and the costs to complete the transactioncan be measured reliably.
ANSWER: BModerate
POINTS: 0 / 1REF: page 196
4. When the outcome of a transaction cannot be estimated reliably, and it is not probablethat the costs incurred will be recovered, revenue should not be recognized, and thecosts incurred should be recognized immediately as an expense. Which accountingprinciple is put into practice in this case?a. Matching principleb. Going concern principlec. Principle of prudenced. Accrual principle
ANSWER: CModerate
POINTS: 0 / 1REF: page 197
5. Dividends should be recognized when the shareholders’ right to receive payment isestablished. This takes place:a. When the books are closed.b. When the business is liquidated.c. When the board of directors decide to distribute dividends.d. When the decision to distribute dividends is made in the shareholders’ general
meeting.
ANSWER: DModerate
POINTS: 0 / 1REF: page 197
6. Which of the following statements is false?a. Permanent differences do not reverse themselves over time.b. In case of permanent differences, the accounting and tax approaches give the
same aftertax income.c. Permanent differences have no future tax consequences.d. Permanent differences are linked to the differences in the timing of revenue and
expense recognition between accounting and tax rules.
ANSWER: DModerate
POINTS: 0 / 1REF: page 202
7. In some countries, a latent gain on marketable securities is taxable in the periodincurred, but is reported under financial accounting only at the time of the sale. Whatwill be generated by this temporary difference?a. Deferred tax liabilityb. Deferred tax revenue
c. Deferred tax assetd. Deferred tax expense
ANSWER: CModerate
POINTS: 0 / 1REF: page 206
8. Taxes payable accounting consists in ignoring a temporary difference; it recognizesincome tax expense in the financial statements for shareholders as identical to theincome tax payable. There is no link between the tax recognized and the triggering eventand thus this principle is in opposition to the ______a. Principle of prudence.b. Accrual principle.c. Going concern principle.d. Matching principle.
ANSWER: DEasy
POINTS: 0 / 1REF: page 209
9. The “completed contract method” and the “percentage of completion method” are bothused for the recognition of income pertaining to a longterm contract. When do thesemethods imply that potential losses on a contract are recognized?a. When they incurredb. At the end of the contractc. As soon as they can be legitimately establishedd. None of the above
ANSWER: CModerate
POINTS: 0 / 1REF: page 212
10. Which of the following categories of government assistance is not specified by IAS 20?a. Contingent loansb. Forgivable loansc. Grants related to incomed. Grants related to assets
ANSWER: AModerate
POINTS: 0 / 1REF: page 221