All Else Equal, a Large Increase in Unearned Revenue in the Current

question 56

Multiple Choice

All else equal, a large increase in unearned revenue in the current period would be expected to produce what effect on revenue in a future period?

• A)Large increase, because unearned revenue becomes revenue when revenue is earned.
• B)Large decrease, because unearned revenue implies that less revenue has been earned, which reduces future revenue.
• C)No effect, because unearned revenue is a liability, so payment will use assets rather than providing revenue.
• D)Large decrease, because unearned revenue indicates collection problems that will reduce net revenues in future periods.