Which of the Following Is True Regarding Income Recognition

question 124

Multiple Choice

Which of the following is true regarding income recognition?

• A)The seller must have substantially performed its obligations to the customer (for example, by transferring ownership of goods to the customer).
• B)The seller must have obtained an asset from the customer that it can reliably measure.If the asset is not cash, the seller must be reasonably certain of converting it into cash.
• C)The firm recognizes expenses when it consumes assets.
• D)If an event or transaction leads to the recognition of revenue, the firm matches the consumption of any assets (the expense), in time, with the revenue recognized.
• E)all of the above

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Definitions:

Segmented Income Statements

Financial statements that divide a company's financial performance into segments, such as departments or product lines, to assess each segment's profitability separately.

CM Ratio

The contribution margin ratio, calculated as the contribution margin divided by net sales revenue, indicating the proportion of sales revenue available to cover fixed costs and generate profit.

Traceable Fixed Expenses

Fixed costs that can be directly linked to a specific department, project, or segment of a business.

Common Fixed Expenses

Overhead costs that do not vary with the level of production or sales, shared across different segments of a business.