What Is True Regarding Unearned Items

question 7

Multiple Choice

What is true regarding Unearned items?

• A)Unearned items consist of revenue a company has not earned and an adjustment is necessary to increase the revenue once it is earned and decrease the liability once the obligation is satisfied.
• B)Unearned items consist of expenses that have not yet been incurred. A company must reduce an asset,prepaid,and increase expense for what has been incurred.
• C)The adjusting journal entry related to Unearned items would increase a liability and reduce revenue to recognize what has been earned.
• D)The adjusting entry related to Unearned items records the amount that needs to be transferred between two accounts,an Expense and a Liability,to show the appropriate balance in each account.

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Definitions:

Stock of Goods

The inventory of products or goods that a company has on hand to sell to customers.

Independent Distributors

Businesses or individuals that distribute products or services, but are not directly employed by the manufacturers of those products, allowing for operational and financial autonomy.

Internal Affairs

A doctrine in corporate law that allows the internal affairs of a corporation, such as shareholder rights, to be governed by the laws of the state of incorporation.

Incorporated

The process of legally declaring a corporate entity as separate from its owners, providing it with certain legal rights and responsibilities.