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(ACC9) Chapter 7 Quiz - Key

1. PFRS 15 applies to contracts with customers. 2. The correct order of steps for revenue recognition under PFRS 15 is: identify the contract with the customer, identify the performance obligations, determine the transaction price, allocate the transaction price to the performance obligations, and recognize revenue when the entity satisfies a performance obligation. 3. According to PFRS 15, an entity satisfies a performance obligation over time or at a point in time for long-term construction contracts.

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158 views2 pages

(ACC9) Chapter 7 Quiz - Key

1. PFRS 15 applies to contracts with customers. 2. The correct order of steps for revenue recognition under PFRS 15 is: identify the contract with the customer, identify the performance obligations, determine the transaction price, allocate the transaction price to the performance obligations, and recognize revenue when the entity satisfies a performance obligation. 3. According to PFRS 15, an entity satisfies a performance obligation over time or at a point in time for long-term construction contracts.

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eyjey.mrqz
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Answer key

1. PFRS 15 applies to
a. Contracts with customers
b. Contracts with sellers
c. A and B
d. All contracts entered into by an entity in the ordinary course of its business

2. Arrange the following steps of revenue recognition in accordance with PFRS 15


I. Identify the performance obligations in the contract
II. Recognize revenue when the entity satisfies a performance obligation
III. Determine the transaction price
IV. Identify the contract with the customer
V. Allocate the transaction price to the performance obligations in the contract

a. IV, I, V, III, II c. IV, I, III, V, II


b. III, IV, I, V, II d. IV, III, I, V, II

3. At contract inception, PFRS 15 requires an entity to determine how the performance


obligation identified in the contract will be satisfied. According to PFRS 15, how does an
entity satisfy a performance obligation in a long-term construction contract?

a. overtime c. dismissal time


b. at a point in time d. either a or b

4. According to PFRS 15, no revenue is recognized on a contract if at the inception, the


collectivity of the contract price is not probable. TRUE

One Z, a construction firm, uses the percentage of completion method, to account for its
construction contracts and measures its progress on a contract using the cost-to-cost
method. During the year, One Z started work on a 10M fixed price contract and incurred
contract costs of 4M. The estimated contract costs are 8M.

5. One Z recognizes gross profit of 500 000 for the year. FALSE
Solution:
Total contract price 10 000 000
Less: Estimated total cost of contract 8 000 000
Total 2 000 000
Multiply by: Percentage of Completion 50%
Total 1 000 000

6. One Z recognizes revenue of 5M for the year. TRUE


(10M x 50% = 5M)
Bestie Company sells merchandise for 8 000 to a customer on December 31, 20x7. The
terms of the sale agreement state that payment is due in one year’s time.

7. The cash selling price of the merchandise is 7 900. Under PFRS 15, how much revenue
should Bestie recognize in profit or loss of the year for the year ended December 31,
20x7? 7 900

8. The cash selling price of the merchandise is not directly observable. However, Bestie
has an imputed rate of interest of 9%. Under PFRS 15, how much revenue should Bestie
recognize in profit or loss for the year ended December 31, 20x7? 7 339.45
(8 000 x 1 /(1.09)^1)

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