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Answer to Problem 2 Finacc2

In: Business and Management

Submitted By kate1234
Words 7904
Pages 32
CHAPTER 2
PROBLEM 2-1 Multiple choice (IFRIC 13)
1. It is a marketing scheme whereby an entity grants award credits to customers and the entity can redeem the award credits in exchange for free or discounted goods or services.
a.. Customer Loyalty Program c. Marketing Program

b. Premium plan d. Loyalty award
2. The award credits granted to customers under a customer loyalty program is often described as
a. Points b. Awards c. Credits d. Loyalty

3. The consideration allocated to the award credits is measured at
a. Fair value of award credits
b. Carrying amount of goods to be received in exchange
c. Fair value of the goods to be received in exchange
d. The proportion of the fair value of the award credits relative to the total consideration received from the initial sale of the goods
4. Under a customer loyalty program, if the entity supplies the awards itself, the consideration allocated to the credits
a. Shall be recognized as revenue immediately
b. Shall not be accounted for as revenue separately
c. Shall be recognized as deferred revenue and amortized as revenue over a reasonable period not exceeding 5 years
d. Shall be recognized initially as deferred revenue and subsequently recognized as revenue upon the redemption of the award credits.

5. Under a customer loyalty program, if a third party supplies the awards and the entity is collecting the consideration for the award credits as principal in the transaction
a. The entity shall not recognize revenue from the award credits
b. The entity shall recognize initially deferred revenue equal to the gross consideration allocated to the award credits
c. The entity shall recognize initially deferred revenue equal to the difference
Between the consideration for the award credits and the amount paid by the entity to the third party
d. The entity shall recognized...

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