Mary Mickaella R.

Ventura
BSA 2-C
Group 3- AMONG US

PROBLEM 5: MULTIPLE CHOICE – THEORY

1. PFRS 15 applies to
a. contracts with customers
b. contracts with sellers
c. a and b
d. all contracts entered into by an entity in the ordinary course of its business.

2. ABC Co., a dealer of medical machines, enters into the following contracts:
I. ABC Co. transfers a machine to X Hospital at contract inception but ABC Co. retains
legal title until the full payment of the consideration.
II. ABC Co. transfers a machine to Y Medical Clinic at contract inception. The
consideration is due after two years. At contract inception, Y is undergoing financial
difficulties. This raises doubt in Y’s ability and intention of paying the consideration.
ABC Co. cannot reliably estimate the outcome of the contract.
III. ABC Co. transfers a machine to Z Co. under a lease contract. The contractual period is 5
years, which is equal to the machine’s estimated useful life. At the end of the contract, Z
Co. is given the option of purchasing the machine. ABC’s past experience shows that
almost all customers avail of the purchase option.

Identify the contracts to which PFRS 15 Revenue from Contract with Customers may be applied.
a. Contract 1 c. Contracts 1 and 3
b. Contract 2 d. None of these

3. Arrange the following steps of revenue recognition in accordance with PFRS 15.
I. Identify the performance obligations in the contract
II. Recognize revenue when (or as) the entity satisfies a performance obligation
III. Determine the transaction price
IV. Identify the contract with the customer
V. Allocate the transaction price to the performance obligations in the contract

a. IV, I, V, III, II c. IV, I, III, V, II

b. III, IV, I, V, II d. IV, III, I, V, II

4. Which of the following must be met before a contract with a customer is accounted for under
PFRS 15?
a. The collection of the consideration must be certain.
b. The contract must be in writing so that there will be no doubt in the customer’s ability and
intention to pay the consideration.
c. The promised goods or services must have already been transferred to the customer.
d. Both contracting parties must acknowledge, whether explicitly or implicitly, the rights and
obligations created under the contract.

5. A consideration received from a contract with a customer that does not meet the criteria under
‘Step 1’ of PFRS 15 is
a. recognized as liability
b. recorded through memo entry only
c. disclosed only
d. b and c

6. Which of the following may be treated as a performance obligation to be accounted for

separately?
I. A promise to transfer a distinct good or service
II. A promise to transfer a distinct bundle of goods or services
III. A promise to transfer a series of distinct goods or services that are substantially the same and
have the same pattern of transfer to the customer
IV. A promise that is implied by the entity’s customary business practices which, at contract
inception, creates a valid expectation on the part of the customer that the entity will satisfy the
promise

a. I only c. I, II and III

b. I and II d. all of these

7. A good or service is distinct if:

I. The customer can benefit from the good or service either on its own or together with other
resources that are readily available to the customer; and
II. The promise to transfer the good or service is separately identifiable from other promises in
the contract.

a. I only c. I and II
b. II only d. none of these

8. A good or service that is not distinct (choose the incorrect statement)

a. shall be combined with the other promises in the contract.
b. may be treated, together with other promises in the contract, as a single performance
obligation.
c. may be identified as a part of a bundle of goods or services or a part of a series of goods or
services to be transferred to the customer.
d. shall be ignored. The entity allocates the transaction price only to the other promises in the
contract that are distinct.

9. A warranty is treated as a performance obligation, and consequently in accordance with PFRS

15, if
a. the warranty provides the customer an assurance that the product complies with agreed-upon
specifications
b. the settlement of the warranty requires an outflow of cash
c. the warranty results from a provision of a law
d. the warranty is provided by a third party that is unrelated to the entity
e. the warranty provides the customer service in addition to an assurance that the product
complies with agreed-upon specifications

10. An option granted to a customer to acquire additional goods or services is treated as a

performance obligation if
a. it provides the customer service in addition to an assurance that the product complies with
agreed-upon specifications
b. it relates to the transfer of goods or services.
c. it gives the customer a material right.
d. the timing of agreed payments provides the customer or the entity with significant benefit of
financing

11. A non-refundable upfront fee is treated as a performance obligation

a. if it relates to the transfer of goods or services.
b. if it relates to administrative tasks to set up a contract
c. if it gives the customer a material right
d. with no exception

12. Which of the following would not cause a consideration in a contract with customer to vary?
a. discount c. price concession
b. sale with right of return d. sale on approval

13. Which of the following is false regarding the accounting for a sale with right of return in
accordance with PFRS 15?
a. Revenue is recognized only for the goods sold that are not expected to be returned in the
future.
b. The revenue recognized may not be equal to the contract price.
c. An asset is recognized for the entity’s right to recover products from the customer on settling
the refund liability.
d. In all cases, no revenue is recognized until after the period wherein the customer can exercise
its right to return the goods elapses.

14. If the timing of agreed payments provides the customer with a significant benefit of financing
(choose the incorrect statement)
a. the entity recognizes revenue equal to the present value of the consideration receivable. This
may require the determination of an implicit interest rate.
b. the entity recognizes revenue equal to the cash selling price of the goods or services
transferred to the customer.
c. the entity need not discount the consideration if the consideration is expected to be received
within one year
d. the entity recognizes revenue when the related good or service transfers to the customer.
However, the imputed interest is recognized in profit or loss over the period from the date the
good or service is transferred to the customer until the date the consideration is fully collected.
e. all of the statements are correct.

15. If the consideration in a contract is other than cash, revenue is recognized at

a. the fair value of the non-cash consideration
b. the selling price of the related good or service
c. choice (a), except when this is not available, then choice (b)
d. none of these