Which of the Following Correctly Applies the Revenue Recognition Principle

question 102

Multiple Choice

Which of the following correctly applies the revenue recognition principle?

• A)Recognize revenue in December 2016 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 dividend revenue in 2016 until the cash is received in 2017.
• D)Recognize revenue in December 2016 for products sold but not yet paid for in full.

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Definitions:

Retained Earnings

The portion of a company's profits not distributed to shareholders as dividends but retained for reinvestment in the business or to pay off debt.

Amortized Cost Basis

An accounting method that gradually writes off the initial cost of an asset over a period, which reflects its consumption or use over time.

Credit Loss

Credit Loss is the loss incurred by a lender when a borrower fails to repay a loan, and the recoverable amount is less than the outstanding balance.

Effective Interest Rate

The real cost of borrowing, taking into account the effects of compounding interest.