PFRS 15 1. PFRS 15 applies to a. Contract with customers b. Contract with sellers c. A and B d. All contracts entered into by entity in the ordinary course of its business 2. What is the core principle of PFRS 15 Revenue from contracts with customer? a. Revenue should be recognized when the entity transfers control of goods or services to a customer. b. Revenue should be recognized when the entity transfers control of goods or services to a customer at an amount to which the entity expects to be entitled. c. Revenue should be recognized over time in a manner that depicts an entity’s performance. d. Revenue should be recognized at a point in time when the control of the goods or services is transferred to the customer. 3. PFRS 15 applies to all contracts with customers except, a. leases b. insurance contracts c. financial instruments d. All of the above 4. PFRS 15 provides the following steps in recognizing revenue except, a. Identify the contract/s with a customer b. Identify the performance obligations in the contract c. Determine the transaction price d. Allocate the transaction price to the performance obligations in the contract e. Recognize revenue when the entity satisfies a performance obligation f. Recognize revenue when the entity collected cash from the customer 5. Which of the following must be met before a contract with a customer is accounted for under PFRS 15? a. The collection of the consideration must be certain b. The contract must be in writing so that there will be no doubt in the customer’s ability and intention to pay the consideration. c. The promised goods and services must have already been transferred to the customer. d. Both contracting parties must acknowledge, whether explicitly or implicitly, the rights and obligations created under the contract. 6. Which of the following may be treated as a performance obligation to be accounted for separately? I. A promise to transfer a distinct good or services II. A promise to transfer a distinct bundle of goods or services III. A promise to transfer a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer IV. A promise that is implied by the entity’s customary business practices which, at the contract inception, creates a valid expectation on the part of the customer that the entity will satisfy the promise. a. I only b. I and II c. I, II and III d. All of these 7. A good or services is distinct if: I. The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer; and II. The promise to transfer the good or service is separately identifiable from other promises in the contract. I only II only I and II None of these 8. A good or service that is not distinct (choose the incorrect statement) a. Shall be combined with the other promises in the contract b. May be treated, together with other promises in the contract as a single performance obligation c. May be identified as a part of a bundle of goods or services or a part of a series of goods or services to be transferred to the customer d. Shall be ignored. The entity allocates the transaction price only to the other promises in the contract that are distinct. a. b. c. d. 9. Under IFRS 15, where a contract with a customer has multiple performance obligations, what will be the accounting treatment to the transaction price? a. The transaction price shall be recognized as revenue to the most important performance obligation. b. The transaction price shall be allocated equally to the different performance obligations. c. The transaction price shall be allocated to the different performance obligations by reference to their relative standalone selling prices. d. The transaction price shall be recognized as revenue only at the end of completion of all performance obligations. 10. Under IFRS 15, where the standalone selling prices of the different performance obligations in a contract with a customer are not available, what methods or approaches may be used to allocate the transaction price? a. Adjusted market assessment approach b. Expected cost plus a margin approach c. Residual approach but only permissible in limited circumstances d. Any of the above 11. Under IFRS 15, when shall an entity recognize revenue from contracts with customers? a. When it is probable that future economic benefits will flow to the entity and the revenue can be measured reliably. b. When or as the entity satisfies the performance obligation. c. When the entity collected the cash from the customers. d. When the entity and the customers sign the contracts. 12. Under IFRS 15, how does an entity satisfy the performance obligation on its contracts with customers? a. Satisfaction of performance obligation over time. b. Satisfaction of performance obligation at a point in time. c. Either A or B. d. Neither A nor B. 13. Under IFRS 15, in which of the following instances will the revenue from contracts with customers be recognized at a point in time instead of over time? a. When the customer simultaneously receives and consumes all of the benefits provided by the entity as the entity performs. b. When the entity’s performance creates or enhances an asset that the customer controls as the asset is created. c. When the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. d. When the entity has transferred physical possession and legal title to the asset to the customer. 14. Under IFRS 15, what shall be presented by the entity in its statement of financial position in relation to its contract with a customer where a customer has paid an amount of consideration prior to the entity performing by transferring the related good or service to the customer? a. Contract liability b. Contract asset c. Contract receivable d. Contract equity 15. If the consideration in a contract is other than cash, revenue is recognized at a. Fair value of the non-cash consideration b. The selling price of the related good or service c. Choice (a), except when this is not available, choice (b) d. None of these 16. Under IFRS 15, when shall the incremental cost of obtaining a contract with a customer be recognized as an asset? a. When it is probable that future economic benefits will flow to the entity and the cost can be measured reliably. b. When the entity expects to recover those costs. c. When the costs will provide economic benefits for a period less than 12 months. d. When the costs will decrease the revenue in the future periods. 17. Under IFRS 15, which of the following costs can be capitalized as an asset for being incremental cost of obtaining a contract with customer? a. Salaries of the legal counsel of the entity. b. Advertising cost to create goodwill for the company. c. Costs that the entity would not have incurred if the contract had not been successfully obtained such as success fees’ paid to agents d. Research and development costs to create a good name for the company 18. Under IFRS 15, when will the practical expedient of expensing the incremental cost of obtaining a contract with a customer be available? a. When it is probable that future economic benefits will flow to the entity and the cost can be measured reliably. b. When the entity expects to recover those costs. c. When the costs will provide economic benefits for a period less than 12 months. d. When the costs will increase the revenue in the future periods. For Numbers 19 - 22 On January 1, 2021, an entity accepted a long-term construction project for an initial contract price of P1,000,000 to be completed on June 30, 2023. On January 1, 2022, the contract price was increased to P1,500,000 by reason of change in the design of the project. The project was completed on December 31, 2023 which resulted to penalty amounting to P200,000. The entity provided the following data concerning the direct costs related to the said project: Year 2021 Costs during the year P440,000 Remaining estimated P660,000 costs to complete at the end of the year Year 2022 P680,000 P280,000 Year 2023 P130,000 - The outcome of the construction contract can be estimated reliably. 19. What is the construction revenue to be recognized by the entity for the year ended December 31, 2021? a. P340,000 b. P400,000 c. P440,000 d. P360,000 20. What is the realized gross profit (gross loss) to be recognized by the entity for the year ended December 31, 2022? e. P200,000 f. P80,000 g. P180,000 h. (P20,000) 21. What is the balance of construction in progress on December 31, 2022? i. P1,200,000 j. P900,000 k. P1,120,000 l. P1,020,000 22. What is the realized gross profit (gross loss) to be recognized by the entity for the year ended December 31, 2023? m. P50,000 n. (P30,000) o. P170,000 p. (P120,000) For Numbers 23 - 26 On January 1, 2018, an entity started the construction of a building at a fixed contract price of P1,000,000. On the same date, the customer paid a mobilization fee equal to 5% of contract price that will be deductible from the first billing. On 2018, the entity billed its customer equivalent to 30% of the contract price. On 2019, the entity billed again its customer amounting to 20% of the contract price. On 2020, the entity billed again its customer amounting to 40% of the contract price. The remaining billing was made at the year of completion of the project. The entity made collection from the customer at the end of year 2018, 2019 and 2020, in the amount of P120,000, P450,000 and P180,000, respectively. The outcome of construction contract cannot be estimated reliably. The entity provided the following data concerning the direct costs related to the said project: Year 2018 Year 2019 Year 2020 Cumulative costs P360,000 P800,000 P870,000 incurred as of the end of the year Remaining estimated P840,000 P250,000 P50,000 costs to complete at the end of the year 23. What is the realized gross profit (loss) for the year ended December 31, 2019? a. (P50,000) b. (P200,000) c. P150,000 d. None 24. What is the realized gross profit (loss) for the year ended December 31, 2020? a. P80,000 e. P130,000 f. P50,000 g. None 25. What is the excess of construction in progress over progress billings (progress billings over construction in progress) on December 31, 2020? a. (P30,000) b. (P80,000) c. P20,000 d. P50,000 26. What is the balance of accounts receivable on December 31, 2020? a. P150,000 b. P100,000 c. P50,000 d. P120,000
