Question

1.Starbucks provides initial consulting services to its licensees and rights to operate a Starbucks store. These are distinct performance obligations. Starbucks satisfies the consulting obligation and receives the initial fee once the initial consulting services are substantially performed. Starbucks receives royalty revenue based on a percentage of product sales of the licensee. How are these revenue streams recognized?

a. Both are recognized at a point in time.

b. The initial fee is recognized at a point in time and the royalty revenue is recognized over time. c. Both are recognized over time. d. The initial fee is recognized over time and the royalty revenue is recognized at a point in time. 2. During periods of rising purchase prices, how does LIFO affect income and asset values relative to FIFO? a. Both income and assets are higher. b. Income is higher and assets are lower. c. Both income and assets are lower. d. Income is lower and assets are higher. Which of the following creates a deferred tax liability? a. Excess tax depreciation on plant and equipment b. Accrued wages c. Deferred revenue d. All of the answer choices create a deferred tax liability. Income tax expense (i.e., the provision for income taxes) equals: a. Current taxes payable – the increase in deferred tax liabilities – the increase in deferred tax assets. b. Current taxes payable + the increase in deferred tax liabilities + the increase in deferred tax assets. c. Current taxes payable + the increase in deferred tax liabilities – the increase in deferred tax assets. d. Current taxes payable – the increase in deferred tax liabilities + the increase in deferred tax assets. Net operating loss carryforwards: a. are deferred tax liabilities. b. have no tax consequences. c. are deferred tax assets. d. reduce current taxes payable.

Answer 1