Question 1

Basic EPS is
A) a measurement of company growth.
B) required on the financial statements under IFRS.
C) used by creditors to make lending decisions.
D) used to determine share price, the lower the EPS the higher the share price.

Accepted Answer

Basic EPS (Earnings Per Share) is required on the financial statements under IFRS as it provides a measure of the company's profitability on a per-share basis.

Question 2

Place an X for each criterion that must be met in order to recognize revenue in each category.

Accepted Answer

The answer of Place an X for each criterion that...

Question 3

Standard setters provide guidelines for recognizing revenue. There are separate standards for IFRS versus ASPE regarding how and when revenue can be recognized.
Instructions
a) Identify and explain the method used to recognize revenue under IFRS.
b) How does the method allowed for IFRS differ from what is allowed under ASPE?

Accepted Answer

The answer of Standard setters provide guidelines for recognizing revenue....

Question 4

On September 25, Olive Oil Distributors receives an order from DeNarda Italian Supermarkets for 125 cases of extra virgin olive oil. Olive Oil accepts the order, which needs to be delivered to DeNarda's warehouse and DeNarda agrees to pay within 30 days of the receipt of the product. Each case of extra virgin olive oil contains 12 bottles at a selling price of $7.50 each. Olive Oil's cost is $3 / bottle. The shipment is received at DeNarda's warehouse on Oct 2 and DeNarda mails a cheque to Olive Oil at the end of the agreed upon payment terms. Olive Oil Distributors used a contact based approach to revenue recognition.
Instructions
a) Determine if there is a contract between Olive Oil Distributors and DeNarda Italian Supermarkets.
b) If there is a contract, record Olive Oil's entries related to these transactions.

Accepted Answer

The answer of On September 25, Olive Oil Distributors receives...

Question 5

Buff it Up, a privately held corporation using ASPE, successfully operates two high-end fitness centres in the same town. Members pay a $150 non-refundable initiation fee, and then a one-year membership for unlimited access to the facilities costs an additional $900. They have 3,200 active members. Memberships are required to be paid in full, in three equal monthly instalments over the first 3 months of a membership year. Partial refunds of the annual fees are only given if a member moves more than 50 kilometres away. In addition to the facilities, there is a juice bar that sells fruit smoothies and healthy snacks. Members can sign for their purchases at the juice bar and then they are billed at the end of the month.
Instructions
Discuss when all revenues should be recognized at Buff it Up. Support your discussion with reference to the specific revenue recognition criteria.

Accepted Answer

The answer of Buff it Up, a privately held corporation...

Question 6

Conquistitor Ltd. reported net income of $750,000 for the year ended July 31, 2020. During the year, the company also declared and paid dividends of $45,000 on the company's preferred shares. At the beginning of the year, Conquistitor had 350,000 common shares outstanding. No shares were issued or repurchased during the year.
Instructions
a) Calculate the basic earnings per-share ratio.
b) Assume 200,000 common shares were issued on Aug 1, 2019 and an additional 150,000 common shares issued on April 1, 2020. Calculate the basic earnings per-share ratio.

Accepted Answer

The answer of Conquistitor Ltd. reported net income of $750,000...

Question 7

Comprehensive income is equal to
A) net income minus other comprehensive income.
B) net income plus other comprehensive income.
C) gross profit plus other comprehensive income.
D) gross profit minus other comprehensive income.

Accepted Answer

Comprehensive income includes both net income and other comprehensive income.

Question 8

Identify and describe the differences between an assurance warranty and service warranty. What are the characteristics of a service warranty?

Accepted Answer

The answer of Identify and describe the differences between an...

Question 9

If your university or college presents its expenses using the terms academic, administration, and student services, the university is presenting their expenses
A) by nature.
B) by function.
C) alphabetically.
D) arbitrarily.

Accepted Answer

The university is presenting their expenses by function because the terms academic, administration, and student services are all functions of the university.

Question 10

What is comprehensive income? How is it reflected in the financial statements? How does it differ from operating income? Provide examples.

Accepted Answer

The answer of What is comprehensive income? How is it...

Question 11

Basically Beautiful Wholesaler sells beauty products to salons and spas. The company's sales for the period ended December 31, 2020 were $1,175,000. The cost of sales are estimated at 60% of revenues, with an estimated return rate of 5%. Returned product is expected to be scrapped. All sales are made on account.
Instructions
a) Prepare Basically Beautiful's partial Statement of Income.
b) Record Basically Beautiful's sales for the period.

Accepted Answer

The answer of Basically Beautiful Wholesaler sells beauty products to...

Question 12

Match the following terms to the descriptions.

Accepted Answer

The answer of Match the following terms to the descriptions....

Question 13

On January 2, 2020 Geek Computers enters into a contract with Bison Protection, a well-established fire protection company, to upgrade and install new computers at 65 work stations. As part of the contract Geek computers also agrees to connect and network all of the computers. Contract details include the following:
$\bullet$The total contract price is $67,500.
$\bullet$The normal retail price of the computers is $48,750. Geek Computers would normally charge $12,500 for an installation of this size and $10,750 for networking services.
$\bullet$The computers cost Geek Computers $500 each.
$\bullet$The contract requires Geek Computers to deliver the computers by January 25, 2020 and have the installation and networking completed by February 15, 2020.
$\bullet$Bison agrees to pay $45,000 upon the delivery of the computers and the balance once the installation is complete, the final payment was made February 28.
$\bullet$Geek Computers uses the contact based approach for revenue recognition.
Instructions
a) Determine if there is a contract between Geek Computers and Bison Protection.
b) If there is a contract, record Geek Computer's entries related to these transactions.

Accepted Answer

The answer of On January 2, 2020 Geek Computers enters...

Question 14

Gossip Girl publishes and sells magazines catering to teenage girls. Subscriptions are sold for $36 for twelve monthly issues. The following chart indicates how many magazines were sold during 2020 and what payment they had received from subscribers by year-end. The first magazine is delivered the same month the subscription is sold. Gossip Girl uses the earning approach for revenue recognition.  Instructions 
a) How much cash did Gossip Girl collect in 2020?
b) What amount of revenue should Great Gossip report for the year ended December 31, 2020?
c) Are there differences between the amount of cash collected and the revenues recognized? If so, explain why.

Accepted Answer

The answer of Gossip Girl publishes and sells magazines catering...

Question 15

On March 15, Luxurious Landscapers enters into a contract with Direct Insurance Brokers to provide landscaping services for the spring and summer season. The contract is to begin on May 1 and terminate on October 31. Luxurious will provide weekly landscaping services during this period. The entire value of the contract is $7,200 for 6 months, to be paid monthly on the first day of each month. Luxurious Landscapers uses the contract-based approach for revenue recognition.
Instructions
a) Determine if there is a contract between Luxurious Landscapers and Direct Insurance Brokers.
b) If there is a contract, record Luxurious' entries related to these transactions for the month of May.

Accepted Answer

The answer of On March 15, Luxurious Landscapers enters into...

Question 16

Comprehensive income includes
A) gains or losses from the sale of property, plant and equipment.
B) gains or losses from the sale of intangible assets.
C) gains or losses from revaluing certain financial statement items to fair value.
D) all of the above

Accepted Answer

The answer of Comprehensive income includes
A) gains or losses from...

Question 17

Examples of functional areas of the income statement are
A) sales, gross profit, and net income.
B) cost of sales, administrative activities, and selling activities.
C) wages expenses, depreciation, and rent expense.
D) gross profit, operating income, and net income.

Accepted Answer

Functional areas of the income statement refer to categories that reflect the different functions or activities of a business, such as cost of sales, administrative activities, and selling activities.

Question 18

Under IFRS the contract-based approach must be used for revenue recognition. Identify and describe the five-step model of revenue recognition that must be used.

Accepted Answer

The answer of Under IFRS the contract-based approach must be...

Quiz 4: Revenue Recognition and the Statement of Income

Basic EPS is

Place an X for each criterion that must be met in order to recognize revenue in each category.

Comprehensive income is equal to

Identify and describe the differences between an assurance warranty and service warranty. What are the characteristics of a service warranty?

If your university or college presents its expenses using the terms academic, administration, and student services, the university is presenting their expenses

What is comprehensive income? How is it reflected in the financial statements? How does it differ from operating income? Provide examples.

Match the following terms to the descriptions.

Comprehensive income includes

Examples of functional areas of the income statement are

Under IFRS the contract-based approach must be used for revenue recognition. Identify and describe the five-step model of revenue recognition that must be used.