Revenue recognition. Work through the why.

CPA BAR | Area II | Revenue recognition

Practice identifying performance obligations, allocating transaction prices, and recognizing revenue. Review a worked explanation after every question.

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The free diagnostic covers Leases; Revenue recognition samples are below. 25 questions in this topic. Both topics included for $39 one-time.

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Revenue recognition

Question 1 of 2

Revenue recognition. Question 1 of 2. In November, a grocery chain orders and pays for a production run of seasonal product from Salted Anchor Foods. The chain asks Salted Anchor to hold the goods until its new regional warehouse opens in February, because the chain has no space to receive them. Salted Anchor moves the finished goods to a segregated area of its warehouse, labels them with the chain’s purchase order number, and cannot sell them to anyone else or use them to fill other orders. The goods are complete and ready to ship. When should Salted Anchor recognize revenue on this order?

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Revenue recognition

Correct answer: C

In November, because the requirements for a bill-and-hold arrangement are met

Worked reasoning

The entity must be unable to use the product or direct it to another customer. Salted Anchor can’t sell these goods to anyone else or use them to fill other orders. All four conditions are satisfied, so control has transferred in November even though the goods haven’t moved. Salted Anchor recognizes revenue in November.

Guidon CPA BAR practice questions

This product provides preparation for the Business Analysis and Reporting section of the Uniform Certified Public Accountant (CPA) exam.

Revenue recognition
25questions
- Distinct performance obligations
- Transaction price allocation
- When to recognize revenue
Leases
55questions
- Lease identification and classification
- Lease liabilities and right-of-use assets
- Lessee and lessor accounting

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80 questions. Both topics included.

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See what this topic actually tests.

Revenue recognition falls under Area II, Technical Accounting and Reporting, the section weighted at 35–45% of the BAR exam, and it’s tested at the application and analysis level, not recall.

The questions ask you to work the five-step model on contracts with more than one obligation: separating distinct goods and services, allocating a transaction price on standalone selling prices, dealing with variable consideration and the constraint, and deciding whether control passes at a point in time or over time. FAR checks whether you know the model. BAR gives you a contract with a wrinkle in it and asks what the financial statements should say.

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