A retailer sells,for cash,a television set with a two-year service contract.The retailer initially records the cash received for the service contract as Unearned Revenue.

Question

Quizplus · Accepted Answer

This is because the service contract is not yet earned by the retailer and therefore cannot be recognized as revenue immediately. It will only be recognized as revenue over the two-year period, as services are rendered.

A Retailer Sells,for Cash,a Television Set with a Two-Year Service