Frenzo Furniture Co.is a manufacturer of specialty furniture,and uses the contract-based approach for revenue recognition.Because each piece of furniture is custom manufactured,the company requires a contract prior to beginning the production process.Contract terms include a payment of 40% of the estimated cost of the finished piece before production begins.Frenzo Furniture Co.should record the collection as a

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Since the customer has paid 40% of the estimated cost of the finished piece before production begins, the company has not yet earned this revenue. Therefore, the payment should be recorded as unearned revenue on the balance sheet until the production process is complete and revenue can be recognized.