Consider a Cheque Received in Payment for Revenues That Have

question 27

Multiple Choice

Consider a cheque received in payment for revenues that have not yet been earned. Assuming that company uses the cash-basis of accounting, how would that payment be recorded?

• A)it would be recorded as unearned revenue until it is actually earned.
• B)the entire amount would be recognized as revenue in the current period.
• C)it would be recorded as a prepaid expense.
• D)none of the above.

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Definitions:

Equity Firms

Equity firms, often referred to as private equity firms, are investment companies that acquire, manage, and sell stakes in companies, using their funds or raised capital.

Net Present Value

A method to evaluate investments by calculating the difference between the present value of cash inflows and outflows over a period.

Synergy Value

The additional value created from combining two or more entities, where the whole is greater than the sum of its parts.

Equity-Financed

Pertaining to a business or project that is funded through the sale of equity or shares rather than debt.