If an Adjustment Is Needed for Unearned Revenues the

question 255

Multiple Choice

If an adjustment is needed for unearned revenues the

• A) liability and related revenue are overstated before adjustment.
• B) liability and related revenue are understated before adjustment.
• C) liability is overstated and the related revenue is understated before adjustment.
• D) liability is understated and the related revenue is overstated before adjustment.

---

Definitions:

Dividends

Payments made by a corporation to its shareholders out of its profits or reserves.

Tax-exempt Interest

Interest income that is not subject to federal income tax, such as that earned from certain municipal bonds.

Interest on a Savings Account

The amount paid by a bank or financial institution to depositors for holding money in a savings account.

Municipal Bonds

Municipal bonds are debt securities issued by states, cities, and other governmental entities to fund public projects, and typically offer tax-free interest payments to investors.