Question: 1. The revenue recognition principle states that revenue is recognized when:

A. The revenue is substantially earned.

B. The revenue is realized.

C. Performance is substantially complete.

D. The related cash is received.

2. Revenue from selling products is generally recognized:

A. At the point of delivery.

B. At the completion of production.

C. After costs are recovered.

D. As cash is collected.

3. The accounting profession presumes that the percentage-of-completion method is the best method of accounting for long term contracts because in most cases:

A. The contract specifies the enforceable rights regarding goods or services to be provided and received by the parties.

B. The buyer can be expected to satisfy all obligations under the contract.

C. The contractor can be expected to perform the contractual obligations.

D. All of the options normally exist in a long-term contract.

4. The completed contract method may be used when:

A. An entity has primarily short-term contracts.

B. There are inherent hazards in the contract beyond normal, recurring business risks.

C. Performance consists of several discrete acts.

D. Revenues are not measurable in advance.

5. A very popular measure used to determine the progress toward completion under the percentage-of-completion method is the:

A. Cost-to-cost method.

B. Efforts expended method.

C. Output method.

D. Units of work performed method.

6. Distributions to shareholders are generally permitted as long as the:

A. Corporation is solvent and distributions do not exceed the fair value of net assets.

B. Distributions are not in excess of the book value of net assets.

C. Corporation is not insolvent.

D. Corporation has funds available to pay the dividend.

7. All of the following dividends decrease retained earnings except:

A. Liquidating dividends.

B. Property dividends.

C. Scrip dividends.

D. Stock dividends.

8. A stock split results in an increase in the number of shares outstanding with no change in:

A. Retained earnings amount.

B. Book value per share.

C. Market value per share.

D. All of the above.

9. Preferred shareholders receive more than the specified dividend rate when the share is:

A. Cumulative.

B. Convertible.

C. Participating.

D. Cumulative or participating.

10. The rate of return on common shareholders' equity is calculated by dividing:

A. Net income by average common shareholders' equity.

B. Net income by ending common shareholders' equity.

C. Net income less preferred dividends by average common shareholders' equity.

D. Net income less preferred dividends by ending common shareholders' equity.