Revenue Recognition and Sale Arrangements Quiz

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Questions and Answers

Who undertakes the responsibility to deliver the food item?

  • Both Zigato and the restaurant
  • The restaurant
  • Zigato (correct)
  • The government

What is the primary responsibility of the restaurant?

  • Paying GST
  • Recognizing revenue
  • Delivering the food
  • Preparing the food and ensuring its quality (correct)

Why is Zigato considered an agent in this scenario?

  • It recognizes revenue
  • It bears the risks and rewards related to delivering food
  • It prepares the food
  • It delivers the food (correct)

How much revenue does Zigato recognize according to the text?

<p>` 60 lakhs (C)</p> Signup and view all the answers

What part of revenue does the GST of ` 40 lakhs represent?

<p>Liability payable to the government (C)</p> Signup and view all the answers

Who bears the loss for any unsold tickets in Trip Deal's business?

<p>Trip Deal (B)</p> Signup and view all the answers

When is performance in a transaction involving the sale of goods considered achieved?

<p>When property in the goods is transferred to the buyer or all significant risks and rewards are transferred (D)</p> Signup and view all the answers

What conditions need to be fulfilled for performance to be achieved in a sale of goods transaction?

<p>Transfer of property in the goods or transfer of significant risks and rewards to the buyer (A)</p> Signup and view all the answers

In situations where transfer of property does not coincide with transfer of risks, when is revenue recognized?

<p>At the time of significant risks and rewards transfer to the buyer (D)</p> Signup and view all the answers

What is one key factor for recognizing revenue in a sale of goods transaction?

<p>The amount of consideration derived (B)</p> Signup and view all the answers

Why might revenue be recognized before property transfer in certain cases?

<p>Because risks and rewards have been significantly transferred to the buyer (B)</p> Signup and view all the answers

In a sale of goods transaction, what triggers revenue recognition?

<p>Transfer of property or significant risks and rewards to the buyer (A)</p> Signup and view all the answers

When should KY recognize revenue for Machine 1 installation?

<p>On 2 April 20X1 (C)</p> Signup and view all the answers

Which machine required significant assistance for installation?

<p>Machine 2 (A)</p> Signup and view all the answers

What was the installation fee for Machine 2?

<p>$10,000 (B)</p> Signup and view all the answers

Which machine had a higher sale price?

<p>Machine 1 (C)</p> Signup and view all the answers

When did ST install Machine 1?

<p>$2 April 20X1 (A)</p> Signup and view all the answers

What indicates that GH has not transferred significant risks and rewards of ownership to the customer for televisions?

<p>Insurance proceeds (D)</p> Signup and view all the answers

When is revenue recognized for a simple installation like plugging in a refrigerator?

<p>After the customer agrees to purchase the goods (D)</p> Signup and view all the answers

In a sale and repurchase arrangement, what should be recognized in the books of the seller instead of a sale?

<p>Borrowing (D)</p> Signup and view all the answers

What should be deducted in determining revenue related to trade discounts and volume rebates given?

<p>Cost of goods sold (D)</p> Signup and view all the answers

When are trade discounts and volume rebates received not considered as revenue?

<p>When deducted from cost (A)</p> Signup and view all the answers

What is the accounting treatment for a borrowing made under a sale and repurchase arrangement?

<p>Recognition of borrowing (C)</p> Signup and view all the answers

In a sale and repurchase arrangement, what transaction occurs on the date of repayment?

<p>Repayment of loan taken from the other party (C)</p> Signup and view all the answers

What should the company do if it is reasonably certain of collecting the `15 lakhs from customers for sales made from 1st January, 20X2 to 31st March, 20X2?

<p>Recognize the additional revenue in the financial statements for the year 20X1-20X2. (B)</p> Signup and view all the answers

If the company is not reasonably certain about collecting the `15 lakhs from customers for sales made from 1st January, 20X2 to 31st March, 20X2, what should the company do?

<p>Postpone recognition of revenue and disclose it in the financial statements for the year 20X1-20X2. (D)</p> Signup and view all the answers

When did the Board of Directors decide to increase the sale price of certain items retrospectively?

<p>31st March, 20X2 (C)</p> Signup and view all the answers

What should a company do if it cannot reasonably assess ultimate collection of additional revenue due to price revision?

<p>Postpone recognition of revenue and disclose it in 20X1-20X2 financial statements. (B)</p> Signup and view all the answers

In which year would a claim passed for payment in March, 20X3 but lodged in March, 20X1 be recorded?

<p>20X2 (D)</p> Signup and view all the answers

What should a company do if a claim lodged with Railways is passed for payment at a lower amount than claimed?

<p>Record the paid amount as revenue. (C)</p> Signup and view all the answers

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