Rainbow Designers took a $1,500 deposit from a customer when they signed the contract to paint the customer's residence.It took them three weeks to complete the job.On completion the customer paid the $3,500 balance.How should Rainbow Designers recognize revenue for this job assuming the job is performed on one accounting period?
A)The $1,500 as revenue when it is received,and the $3,500 as revenue when it is received.
B)The $1,500 as unearned revenue and the $3,500 as revenue when it is received.
C)$5,000 as revenue at the completion of the project.
D)The $1,500 as unearned revenue and $5,000 as revenue when the project is completed.

Question

Quizplus · Accepted Answer

The $1,500 deposit should be recorded as unearned revenue as it has not yet been earned. The $3,500 balance should be recorded as revenue when the project is completed. Therefore, the best choice is D.

Rainbow Designers Took a $1,500 Deposit from a Customer When