When Cash Is Debited for Rents That Are Collected but Are

question 32

Multiple Choice

When cash is debited for rents that are collected but are not yet earned, the amount credited should be

• A) recognized as revenue when collected.
• B) presented as a liability until earned.
• C) recorded as an asset until earned.
• D) presented as a separate item in shareholders' equity.

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Definitions:

Variable Cost

Costs that change in proportion to the level of activity or volume, such as raw materials and direct labor.

Units Sold

A measure of the quantity of inventory items that a company has sold to its customers within a particular period.

Prime Cost

The combined cost of direct materials and direct labor involved in manufacturing a product.

Period Costs

Expenses directly tied to a specific time period, such as rent, utilities, and administrative salaries, and not directly to the production process.