Are Prepaid Amounts Received from Customers Treated as Revenue at the Time

question 129

Multiple Choice

Are prepaid amounts received from customers treated as revenue at the time of receipt? Why or why not?

• A)Yes they are treated as revenue at the time of receipt because the company has access to the cash.
• B)No the amount of revenue cannot be adequately determined until the company completes the work.
• C)Yes The intent of the company is to perform the work and the customer is confident that the services will be completed.
• D)No revenue cannot be recognized until the work is performed.

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Definitions:

Capital Stock

The amount of ownership shares of a company, including both common and preferred stock, authorized and issued to investors.

Stated Value

An arbitrary value assigned to a company's share that does not have a par value, used for accounting purposes.

Market Value

The present cost at which a service or asset is available for buying or selling in the market.

Contributed Capital

Refers to the capital that is raised by issuing shares of stock, representing the total value of all stock sold to shareholders.