Chapter 5 Quiz
Question 1.) Fairmont Company has shipped goods to Willowbook Recreation FOB shipping
point. Fairmont will recognize sales revenue when
A. the goods leave Fairmont's shipping dock.
B. Fairmont and Willowbrook agree that the revenue should be recognized.
C. the customer has paid the invoice.
D. Willowbrook has received the goods.
Question 2.) Crystal Lake Legal Association performs legal services for Archer Construction for
$8,000 on account with credit terms of 3/10, n/30. If Archer pays the invoice within the
discount period, Crystal Lake will record a debit to Cash in the amount of
A. $8,000
B. $8,240
C. $240
D. 7,760
Question 3.) Which of the following statements is correct?
A. Sales returns and allowances increase a company's profit.
B. If a customer returns a product, sales revenue will be credited.
C. The performance obligation in a sale of products is generally satisfied when the customer
orders the products.
D. A company must accrue for estimated future returns at the end of the period in which
the related sales revenue is recognized.
Question 4.) Which of the following statements regarding contracts is incorrect?
A. Identifying the contract with the customer is the first step of the revenue recognition
model.
B. A contract must be written to be valid.
C. For a business that provides services, the performance obligation is generally satisfied
when the service provider has substantially completed the service for the customer.
D. A contract is an agreement between two parties that creates enforceable rights or
performance obligations.
Question 5.) On August 1, 2021, Avonette, Inc., sold equipment and accepted a six-month, 9%,
$50,000
