21 which statement best describes a franchise arrangement a an arrangement in which 4306330

21 which statement best describes a franchise arrangement a an arrangement in which 4306330

21) Which statement best describes a franchise arrangement?

A) An arrangement in which one party licenses its business practices to another party.

B) An arrangement in which one party exchanges goods or services with another party with little or no consideration.

C) An arrangement in which one party provides goods to another party to sell on its behalf and will accept all goods that are not sold.

D) An arrangement in which one party allows the purchaser to make payments over an extended period of time.

22) In September, Fast-Foods Inc. (FF) sells a franchise for an initial fee of $150,000 and ongoing fees based on 3% of gross profit. FF estimates that 20% of the initial fee relates to initial training, store design and opening activities; the remaining 80% relate to activities to be performed over 3 years. How much revenue should be recorded in September?

A) $4,500

B) $30,000

C) $120,000

D) $150,000

23) What accounting issue arises for recognizing non-monetary transactions?

A) Determining when the risks and rewards are transferred.

B) Determining the stage of completion.

C) Determining the costs incurred or still to be incurred.

D) Determining the amount at which to record the transaction.

24) On December 1, 2011, SuperTech sold 100 locks for laptop computers at $50 each with a 90-day unconditional right of return. Since this is a new product for SuperTech, it has no past history regarding estimated returns. Which of the following is true regarding SuperTech's December 31, 2011 financial statements?

A) Sales of $5,000 should only be recognized in 2012 when the return privilege expires.

B) Sales of $5,000 should be recognized in 2011 as long as there is a reserve for returns.

C) Sales of $5,000 should be recognized in 2011, with future costs accrued as an estimated liability.

D) Sales should only be recognized as the related cash is collected.

25) On September 1, 2011, Electric Depot sold 100 laptop computers at $750 each with a 120-day unconditional right of return. Customers have 90 days to pay. Based on past experience, Electric Depot estimates that approximately 1% will be returned. Which of the following is true regarding Electric Depot's December 31, 2011 financial statements?

A) Sales of $75,000 should only be recognized after 120 days when the return privilege expires.

B) Sales of $75,000 should be recognized in September with a reserve for returns of $750.

C) Sales of $75,000 should be recognized in September 2011.

D) Sales should only be recognized as the related cash is collected.

26) DB Inc. sells goods on a variety of terms to its customers, such as some sales on credit, some on consignment, and some on an installment basis. Which of the following revenue recognition methods is most applicable for a company like DB?

A) Installment sales method, if the credit risk is low.

B) Installment method, if credit risk is high.

C) At time of shipment to the consignee, for consignment sales.

D) At the point of sale, if credit risk is very high.

27) Which of the following is an acceptable revenue-recognition method?

A) At time of shipment, if warranty uncertainty is not reliably measurable.

B) At time of shipment to the consignee, for consignment sales.

C) Installment method, if credit risk is high.

D) At the point of sale, if credit risk is very high.

28) RU FIT Centre opened for business on April 5, 2011. For revenue recognition purposes, all memberships are assumed to be issued at the beginning of the month, with 1-year memberships costing $600 and 2-year memberships costing $960. During April, 32 1-year memberships and 25 2-year memberships were sold. RU FIT Centre prepares monthly financial statements. Which of the following statements is correct?

A) Revenue to be recognized as earned for the month of April is $2,600.

B) Revenue to be recognized as earned for the month of April is $3,600.

C) Revenue to be recognized as earned for the month of April is $43,200.

D) Deferred revenue at April 30 would be $43,200.

29) Shear Company sells computer equipment with a 2-year warranty. Prior experience indicates that costs associated with this warranty average 1% in the first year and 2% in the second year. In 2012, Shear had sales of $1,800,000. It paid $250,000 for materials and labour to make warranty-related repairs in 2012. What amount should the warranty expense for 2012 be?

A) $18,000

B) $36,000

C) $54,000

D) $250,000

30) YMN had sales of $1,500,000, including:

• $25,000 of goods shipped on consignment to an unrelated company on December 28, 2011 and received by that company on December 31, 2011

• $20,000 of goods shipped F.O.B. shipping point to a different unrelated party on December 31, 2011 and received on January 2, 2012.

On its income statement, what amount of net sales should YMN record for 2011?

A) $1,455,000

B) $1,475,000

C) $1,525,000

D

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