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Chapter 11: 4RQ (page 603)

How do unearned revenues arise?

Short Answer

Expert verified

A company may consider revenue earned only when it has substantially delivered a product or performed a service.

Step by step solution

01

Meaning of Unearned Revenue

When a company or an individual receives the amount in advance but will deliver the product or the services in the future, this particular advance received amount is known as the unearned revenue.

02

Recognition of unearned revenue

Unearned avenue arises when the business recieves the amont in advance, and it cannot recognize revenue until it delivers the commodity or the service to the consumer who paid for it; unearned income is a crucial accounting term.

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Most popular questions from this chapter

Consider the following transactions of Sapphire Software: Mar. 31 Recorded cash sales of $230,000, plus sales tax of 7% collected for the state of New Jersey. Apr. 6 Sent March sales tax to the state. Journalize the transactions for the company. Ignore cost of goods sold.

List the required employee payroll withholding deductions, and provide the tax rate for each.

What is the difference between gross pay and net pay?

The income statement for California Communications follows. Assume California Communications signed a 3-month, 9%, $3,000 note on June 1, 2018, and that this was the only note payable for the company.

Requirements

1. Fill in the missing information for California’s year ended July 31, 2018, income statement. Round to the nearest dollar.

2. Compute the times-interest-earned ratio for the company. Round to two decimals.

Coltrane Company has a \(5,000 note payable that is paid in \)1,000 instalments over five years. How would the portion that must be paid within the next year be reported on the balance sheet?
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