TRUE OR FALSE (shows references are required) 1. A contract between a seller and

Question

TRUE OR FALSE (shows references are required) 1. A contract between a seller and a buyer need not be in writing to be enforceable 2. If the contract is not in writing, 3. 4 A contract exists for purposes of revenue recognition if either the seller or customer has SELECT THE BEST ANSWER (Shows references and computations are required) 5. Which of the following is a characteristic of a contract for purposes of revenue revenue cannot recognized, even though goods have transferred and payment expected to receive in exchange. The probability that the customer will pay the seller does not affect whether a contract exists for purposes of revenue recognition. performed an obligation specified by the contract recognition? A) Commercial substance. B) Nonverbal. C) Reasonable profit margin. D) Notarized within the company's state of incorporation.

Explanation / Answer

Ans 1: True

Reason: Both verbal and written contract are considered to be enforceable subject to the condition that the goods are transfered or consideration being received between the buyer and seller.

Ans 2: False

Reason: when there is a exchange of goods and payment is received then all the reasonable riska nd reqard associated with the goods are transfered to the buyer so revenue to be recognised.

Ans 3: False

Reason: The revenue will not be recognised if the risk associated with the contract i.e. certainity to receive the consideration then revenue willnt be recognised till the consideration is received.

Ans 4: True

Reason: when one party performs there part of the contact as per the terms of the contract then its bindable on the other party to perform their part or pay the damages otherwise.

Ans 5: a) commercial substance

Reason: to recognise revenue for the busienss it should have consideration involved and its to be in line of business.

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