Which of the Following Correctly Applies the Revenue Recognition Principle

question 58

Multiple Choice

Which of the following correctly applies the revenue recognition principle?

• A)Recognize revenue in December 2019 for products manufactured but not yet delivered to customers.
• B)Recognize cash received in advance from customers as revenue when the product is not yet shipped.
• C)Not recognize service revenue in 2019 until the cash is received in 2020.
• D)Recognize revenue in December 2019 for products sold but not yet paid for in full.

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Definitions:

Allocation Sequence

The order or process by which costs or resources are distributed among various departments or projects.

Service Departments

Units within an organization that support other departments but do not directly contribute to the production of goods or delivery of primary services.

Reciprocal Method

A technique used in cost accounting to allocate service department costs to production departments by recognizing the interdependencies between service departments.

Direct Method

A means of allocating service department costs directly to production departments without apportioning them among service departments first.