A Liability Created by the Receipt of Cash from Customers

question 61

Multiple Choice

A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is

• A) recorded as a debit to an unearned revenue account
• B) recorded as a debit to a prepaid expense account
• C) recorded as a credit to an unearned revenue account
• D) recorded as a credit to a prepaid expense account
• E) not recorded in the accounting records

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Definitions:

Useful Life

The estimated duration an asset is expected to be economically viable or productive.

Composite Depreciation Method

A method used to depreciate a group of assets that have different lives and uses as one single asset, applying a uniform depreciation rate.

Accumulated Depreciation

The total depreciation that has been recorded for an asset over its useful life.

Gain On Sale

The profit earned from the sale of an asset above its book value.