According to FASB ASC 606, a Company Must Account for a Contract

question 12

Multiple Choice

According to FASB ASC 606, a company must account for a contract modification as a new contract if the

• A) Goods or services are interdependent on each other
• B) Promised goods or services are distinct
• C) Company has the right to receive consideration equal to standalone price
• D) Goods or services are distinct and company has right to receive the standalone price

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Definitions:

Common Dividends

Payments made to shareholders from a corporation's earnings, representing a portion of the profits allocated to holders of the company's common stock.

Revenue Test

A criterion used to determine when revenue is recognized in the accounting records, based on the completion of a revenue-generating process or event.

Asset Test

A measure used to evaluate a company's ability to meet its short-term liabilities with its most liquid assets.