CPA FAR Practice Test

CPA FAR Revenue Recognition & Contributions Practice Questions

Revenue Recognition & Contributions makes up 4 of every 50 questions on a Tigertest CPA FAR practice test. Here are 10 of the 16 questions on it, each with the answer and the reason.

Updated 2026-11-10 by the Tigertest team. Based on the AICPA's 2026 FAR blueprint. Original multiple-choice questions; simulations not included. Not affiliated with the AICPA or NASBA.

1. 1. The first step of the ASC 606 five-step revenue model is to:

   • A.Allocate the price
   • B.Identify the contract
   • C.Identify the obligations
   • D.Set the transaction price

   Answer: B. The steps are: identify the contract, identify the performance obligations, determine the transaction price, allocate it, and recognize revenue as each obligation is satisfied.

2. 2. A company sells a device with a year of support for $900. Standalone selling prices are $800 for the device and $200 for the support. Revenue allocated to the device is:

   • A.$700
   • B.$450
   • C.$800
   • D.$720

   Answer: D. The price is allocated by relative standalone selling price: $900 x $800 / $1,000 = $720. Giving the support its full $200 and the device the rest ($700) is a residual approach that does not apply here.

3. 3. A promised good is a separate performance obligation when it is:

   • A.Distinct and separately identifiable
   • B.Listed in a separate clause
   • C.Priced on a separate invoice
   • D.Delivered in a separate month

   Answer: A. A good is distinct if the customer can benefit from it on its own or with readily available resources and the promise is separately identifiable in the contract. Invoicing and timing do not decide it.

4. 4. Variable consideration is included in the transaction price only to the extent that:

   • A.It is certain to be collected in cash
   • B.It is reasonably possible to be earned
   • C.It is probable no significant reversal occurs
   • D.It is more likely than not to be earned in full

   Answer: C. The constraint includes variable consideration only to the extent it is probable that a significant reversal of cumulative revenue will not occur when the uncertainty resolves.

5. 5. Which condition means revenue is recognized over time rather than at a point in time?

   • A.Contract runs for over a year
   • B.Seller sends a bill each month
   • C.Customer consumes benefits as performed
   • D.Customer pays half the price upfront

   Answer: C. One of the ASC 606 over-time criteria is that the customer simultaneously receives and consumes the benefits as the entity performs, as in a cleaning service. Billing and payment terms do not decide it.

6. 6. A contractor's price is $2,000,000 and its total estimated cost is $1,500,000. Costs incurred to date are $600,000. Using a cost-to-cost input method, revenue to date is:

   • A.$800,000
   • B.$1,200,000
   • C.$200,000
   • D.$600,000

   Answer: A. Progress is $600,000 / $1,500,000 = 40%, and 40% x $2,000,000 = $800,000. $200,000 is the gross profit to date, not revenue.

7. 7. An online platform arranges hotel stays but never controls the rooms. It recognizes revenue equal to:

   • A.Nothing until the guest leaves
   • B.The full room price charged
   • C.The room price less taxes
   • D.Its net fee or commission

   Answer: D. An agent that arranges for another party to provide the service recognizes revenue as the net fee it keeps. A principal that controls the service before transfer reports the gross amount.

8. 8. A salesperson earns a $9,000 commission for signing a three-year service contract that the company expects to recover. The commission is:

   • A.Netted against revenue
   • B.Capitalized and amortized
   • C.Expensed when it is paid
   • D.Capitalized, never amortized

   Answer: B. Incremental costs of obtaining a contract are capitalized when expected to be recovered and amortized as the services transfer. Expensing is a practical expedient only when amortization would be one year or less.

9. 9. A consignor ships goods to a consignee who sells them to end customers. The consignor recognizes revenue:

   • A.At the end of each reporting month
   • B.When the consignee sells them
   • C.When it ships them out
   • D.When the consignee pays

   Answer: B. In a consignment the consignee does not obtain control of the goods, so the consignor recognizes revenue when control passes to the end customer.

10. 10. A company delivers equipment today for a single payment of $121,000 due in two years. The financing component is significant and the discount rate is 10%. Revenue at delivery is:

    • A.$110,000
    • B.$90,000
    • C.$121,000
    • D.$100,000

    Answer: D. With a significant financing component, revenue is the cash selling price: $121,000 / 1.1^2 = $100,000. The $21,000 is interest income over the two years.