A company received an order from a customer in June for services to be provided. Those services were provided in July, and the customer paid the full amount in August. According to the revenue recognition principle, in which month should the company record revenue?

A) June.

B) July.

C) August.

D) Evenly over the three months.

Ch3 answer: B

A customer purchased a drill press on November 14 on account from Sears. The drill press was delivered two weeks later. The customer paid for the drill press on December 5. When should Sears record the revenue for this transaction according to the revenue recognition principle?

A) November.

B) December.

C) Evenly in each of the two months.

D) One-third in November and two-thirds in December.

Ch3 answer: A

Air France collected cash on February 4 from the sale of a ticket to a customer on January 26. The flight took place on April 5. According to the revenue recognition principle, in which month should Air France have recognized this revenue?

A) January.

B) February.

C) April.

D) Evenly in each of the three months.

Ch3 answer: C

Which of the following provides a description of the relation between revenues and expenses for financial reporting purposes?

A) Valuation consequences.

B) Equal dollar amounts.

C) Cause-and-effect.

D) Comparability of transactions.

Ch3 answer: C

The basic principle involved with expense recognition is:

A) All costs that are used to generate revenue are recorded in the period the revenue is recognized.

B) All transactions are recorded at the exchange price.

C) The business is separate from its owners.

D) The business will continue to operate indefinitely unless there is evidence to the contrary.

Ch3 answer: A

A company recognizes revenue in the period in which it records an asset for the related account receivable, rather than in the period in which the account receivable is collected in cash. This company is using:

A) Cash-basis accounting.

B) Accrual-basis accounting.

C) The recording principle.

D) The entity assumption.

Ch3 answer: B

Which accounting principle states that a company should "record revenues when they provide goods and services to customers?"

A) Valuation.

B) Revenue recognition.

C) Conservatism.

D) Materiality.

Ch3 answer: B