Malek Inc.is a retailer of home appliances and offers a service contract on each appliance sold.Elton sells appliances on instalment contracts, but all service contracts must be paid in full at the time of sale.Collections received for service contracts should be recorded as an increase in a

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Collections received for service contracts represent unearned revenue, which should be recorded as a liability in a deferred revenue account until the service is performed. Therefore, choice A (deferred revenue account) is the best option. Choice B (sales contracts receivable valuation account) is not appropriate, since this account would be used to record the value of accounts receivable arising from the sale of goods, not service contracts. Choice C (shareholders' valuation account) is incorrect as well, since this type of account is not related to the recognition of revenue. Choice D (service revenue account) is also incorrect, since this account would be used to record revenue earned from the performance of services, not the initial collection of payments for a future service.

Malek IncIs a Retailer of Home Appliances and Offers a Service