Intermediate Accounting II Exam 2

Revenue Recognition determines

• How much revenue is recorded?

• When to record it

• What to record

• Why you should record it

The seller's promise to transfer goods or services to the customer is known as a __________________-.

Over a Period of time requirements are:

• The customer consumes the benefit of the seller's work as it is performed

• The customer controls the asset as it is created

• The seller is creating an asset that has no alternative use to the seller, and the seller has the legal right to receive payment for progress to date

• The customer can hold payment if a legal action occurs between buyer and customer

• The seller can make use of an asset.

Good/service can be used alone or with other goods that can be obtained elsewhere

• Capable of being distinct

• Separately Identifiable

Good/service are not highly interrelated with other good/services in the contract

• Capable of being distinct

• Separately Identifiable

An agreement that creates legally enforceable rights and obligations. Can be oral or written

Contracts do not exist if

• Neither the seller nor the customer has performed any obligations under the contract

• Both the seller and the customer can terminate the contract without penalty

• Neither the seller nor the customer sign a written contract

• Both the seeker and customer get involved in a lawsuit

Provides protection beyond the manufacture's quality-assurance

• Extended Warranty

• Option

Granted to the customer to receive additional goods or services at no cost or at a discount as a performance obligation

• Extended Warranty

• Option

Option need to consider

• Material Right

• Likelihood that customer will use option

• Contract renewal options

• Recorded as deferred revenue liability