Question : Learning Objective 3-3 1) What type of account Unearned revenue? A) an : 1253160

Learning Objective 3-3

1) What type of account is Unearned revenue?

A) an asset

B) a liability

C) a revenue

D) part of shareholders’ equity

2) The Unearned revenue account represents the amount of ________.

A) cash paid to customers during the period

B) cash collected from customers during a period

C) goods and services sold to customers during a period

D) goods and services that a company owes its customers

3) Which financial statement shows Unearned revenue?

A) Income statement

B) Statement of changes in shareholders’ equity

C) Statement of cash flows

D) Balance sheet

4) Why would the Unearned revenue account need to be adjusted at the end of the period?

A) Revenue that had been deferred is now earned.

B) Revenue has been recorded, and cash has not yet been received.

C) Liabilities are unrecorded.

D) Assets would otherwise be understated.

5) In February, Ira Roth, Public Accountant, accepted $500 in cash from a customer in exchange for a tax return he promised to prepare in April. Which of the following statements is true?

A) Ira has earned $500 in February.

B) Ira has a $500 liability in February.

C) Ira does not need to record anything in February. He can wait until April.

D) Ira has to record Cash of $500 in April when the return is prepared.

6) Hen House, Inc. collects all subscription revenue in advance. At December 31, 2011, the company owed $50,000 to customers for unearned revenue. During 2012, the company received $150,000 in advance from its customers and delivered $190,000 of magazines to its customers. How much subscription revenue will Hen House, Inc. report on its income statement for the year ended December 31, 2012?

A) $200,000

B) $190,000

C) $10,000

D) $210,000

7) Hen House, Inc. collects all subscription revenue in advance. At December 31, 2011, the company owed $50,000 to customers for unearned revenue. During 2012, the company received $150,000 in advance from its customers and delivered $190,000 of magazines to its customers. How much unearned revenue will Hen House report on its balance sheet at December 31, 2012?

A) $200,000

B) $190,000

C) $10,000

D) $210,000

8) Reader, Inc. collected $12,000 in October 2011 from customers in exchange for 12-month subscriptions to its monthly magazine Reader. The October issue was the first issue of the subscription. How much revenue should the company report on its income statement for the year ended March 31, 2012?

A) $12,000

B) $8,000

C) $6,000

D) No revenue will be recognized until all the magazines are delivered.

9) Magic, Inc. collected $12,000 in October 2011 from customers in exchange for 12-month subscriptions to its monthly magazine Magic Times. The October issue was the first issue of the subscription. How much revenue should the company report on its income statement for the year ended December 31, 2011?

A) $3,000

B) $6,000

C) $12,000

D) No revenue will be recognized until all the magazines are delivered.

10) Magic, Inc. collected $24,000 in October 2011 from customers in exchange for 12-month subscriptions to its monthly magazine Magic Times. The October issue was the first issue of the subscription. Which statement below is true regarding the effects of collecting the cash from customers in October?

A) Assets and liabilities will increase by $24,000.

B) Assets will increase and shareholders’ equity will decrease by $24,000.

C) Liabilities and shareholders’ equity will increase by $24,000.

D) Assets and shareholders’ equity will increase by $2,000.