Assume That Yosuke Wants to Rent a Room at a Lakeview

question 1

Multiple Choice

Assume that Yosuke wants to rent a room at a Lakeview apartment,the landlord requires a one-time,non-refundable $50 application fee and a contract cancelable with 5 days notice,charges $500 per month to rent the apartment for the next 12 months.How are the $50 application fee and the $500 monthly rental accounted for under U.S.GAAP or under IFRS?

• A)Under U.S.GAAP,the $50 payment is recognized as revenue immediately,while the $500 payment is recorded as revenue each month.
• B)Under U.S.GAAP,the $50 payment is recorded as unearned revenue and allocated over a reasonable future period.The $500 payment is recorded as revenue each month.
• C)Under IFRS,the $50 payment is recorded as unearned revenue and allocated over a reasonable future period.The $500 payment is recorded as revenue each month.
• D)None of the above.

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Definitions:

Unit Conversion Cost

The cost associated with converting raw materials into a finished product on a per-unit basis.

Equivalent Units

A concept used in cost accounting to express the amount of work done in terms of fully completed units of output during a period.

Conversion Costs

Conversion costs are the sum of direct labor and manufacturing overhead costs that are required to convert raw materials into finished products.

Direct Materials

Raw materials that are directly used in the manufacturing process of a product and can be directly traced to the goods being produced.