smes revenue.docx

8/13/2019 SMEs Revenue.docx

1/3

Question 1: Which of the following are not covered by Section 23 Revenue?

a. Revenue from lease agreements.

b. Changes in FV of financial assets and financial liabilities or their disposal.

c. Change in FV of biological assets relating to agricultural activity.

d. All of the above.

Question 2: Percentage of completion must be used to recognize revenue from:

a. Rendering of services and construction contracts.

b. Rendering of services, only when the outcome can be estimated reliably.

c. Construction contracts, only when the outcome can be estimated reliably.

d. Both b and c.

Question 3: In general, revenue is recognized when the earnings process is substantially complete and:

a) The sales price has been realized or is realizable.b) The sales price has been collected.

c) Production is completed.

d) A purchase order has been received.

Question 4: Car dealer sales promotionfree servicing and 2-years zero interest credit. Recognise

revenue separately for:

a. Entirely sale of goods?

b. Sale of goods and rendering of maintenance services?

c. Sale of goods, rendering of services, and a financing element (interest) related to the deferredpayment?

Problem 1: In 20X1, Build Construction Corporation contracted to build a motel. The contract price is

P300,000 and the total cost is estimated as P200,000. Over the construction period there has been no

change in either the contract price or the estimated total cost. Costs incurred for 20X1 and 20X2 are


2/3

P100,000 and P80,000, respectively. How much gross profit should be recognized in 20X1 under the

percentage-of-completion method?

a. P50,000b. P100,000

c. P120,000

d. P40,000

Answer: P50,000

Solution:

Total gross profit ($300,000 - $200,000) P100,000

Gross profit rate ($100,000 / $200,000) 50%

Gross profit realized in 20X1 P50,000

OR

Contract Price P100,000

Cost (100,000/200,000) 50%

Gross Profit Realized P50,000

Problem 2: Goods with list price of P1, 000 sold to customer on normal credit terms. Customer pays 690

in full settlement. There is P200 trade discount, P100 volume rebate, P10 prompt payment discount. Of

the P690, P50 is sales tax to be remitted to government. How much profit should be recognized?

a. P640b. P690

c. P1,000

d. P900

Answer: Profit of P640.

Solution:

P1,000 list price less P200 trade discount less P100 volume rebate less 10 prompt-settlement

discount less P50 sales tax collected on behalf of the government = P640.

I can live with losing a good fight, but I cannot live without fighting it! When I became a runner, I knew

running was an epic battle and only a warrior who believed running was not about what your feet could do

for you but what you could do with your feet. I knew sometimes things would get a little scary but courage

- it isn't the absence of fear, it is the presence of fear yet the will of the heart. And on that day, a Runner

was born.


3/3

Struggles! Difficulties! Challenges! All these we see daily and we feel like giving up but remember: there

is a dawn after the night.

smes revenue.docx

Documents