Question

Anderson Accounting Services LLC provides accounting and tax preparation and consulting services. Sometimes customers only wish to have financial statements and/or tax returns prepared. Sometimes customers bundle accounting and tax preparation with consulting services (to be provided over a period of time). Sometimes customers only wish to have consulting services provided over a period of time. Because Anderson is a service firm there is no cost of goods sold associated with their services.

Customer is Civic Corporation					1
Tax consulting begins on November 1st and runs through the next April					11/1/X7
Date of contract					11/1/X7
Length of consulting services					6 months	months
Tax return preparation occurs over the period February through April of					20X8
Length of tax prepartion					3 months
Price of tax preparation to be allocated over the return preparation period					$             2,000	stand alone price
Price of consulting services to be allocated over consulting period					$              5,000	stand alone price
Customers are charged a lesser amount as follows for both tax and consulting					$              6,000
Anderson Accounting Services LLC's current year end					12/31/X7
Customers pay at the contract date for BOTH the consulting and tax preparation services.

What are the performance obligations in the contract?

	A.	Tax preparation services
	B.	Tax preparation services and tax consulting services
	C.	Unable to determine
		D.Tax consulting services QUESTION 3 Determine the transaction price that should be allocated to the consulting services. A. $4,286 B. $1,714 C. $1,429 D. $4,571 QUESTION 4 Calculate the total revenue that should be recognized in the current accounting period. A. $4,571 B. $1,714 C. $1,429 D. $4,286 QUESTION 5 What is the total amount in the deferred revenue account(s) at the end of the current accounting period? A. $1,714 B. $4,571 C. $4,286 D. $1,429 QUESTION 6 What is the total amount of revenue that should be recognized in the NEXT accounting period period? A. $1,714 B. $4,286 C. $1,429 D. $4,571 QUESTION 7 The following journal entry has what impact on the income statement? Debit Cash XXX Credit Deferred Revenue XXX A. No impact B. Decrease C. Increase QUESTION 8 The following journal entry has what impact on the income statement? Debit Cash XXX Credit Accounts Receivable    XXX A. No impact B. Increase C. Decrease QUESTION 9 Revenue is defined as: An inflow or other enhancements of assets of an entity or settlement of its liabilities (or a combination of both) during a period from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations. Revenue is recognized from the settlement of which of the following liabilities: A. Discount on Bonds Payable B. Deferred Revenue C. Salaries Payable D. Accrued Interest QUESTION 10 A customer must have "control" over the good or service in order for a performance obligation to be considered as having been satisfied for purposes of revenue recognition.   A. TRUE B. FALSE

Answer 1

Q2. Tax preparation services and tax consulting services

Q3. Option A- 4,286

Total Contract Price	$        6,000
Stand Alone Price
Consulting services	$        5,000
Tax preparation	$        2,000
Total Price	$        7,000
Allocated to Consulting (6000/7000*5000)	$        4,286

Q4. Option C- $1,429

Revenue to be Recognised in Current Period (4286/6*2)

$        1,429

Q5. B - $4,571

Total Contract Price	$        6,000
Less: Revenue Recognised	$        1,429
Deferred Revenue	$        4,571

Q6. Option D. $4,571

Total Contract Price	$        6,000
Less: Revenue Recognised in Current Year	$        1,429
Revenue to be recognised next year	$        4,571

Q7. Option A- No Impact

Deferred Revenue will be shown in the balance sheet as the current liability

Q8. No Impact

Debit Cash will increase the Cash and Credit Receivables will Decrease the Receivables. No impact on the Income Statements.

Q9. B- Deferred Revenue

Q10 - True

Dear Student,

Best effort has been made to give quality and correct answer. But if you find any issues please comment your concern. I will definitely resolve your query.