Week 3 discussion questions

Week 3 discussion questions - Week 3 discussion questions...

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Week 3 discussion questions 1.What types of industries have unearned revenue? Why is unearned revenue considered a liability? When & where is the unearned revenue recognized in the financial statements? Provide a specific example if you can. 1. Unearned revenue occurs whenever a customer prepays for the good/service being purchased. Some examples of unearned revenue: a. Legal Profession. Retainers paid to attorneys. b. Service Providers like Cable/Phone service (when paid for in advance and refundable on a pro rata basis when canceled) c. Insurance industry (premiums paid in advance for a period) d. Travel industries - airline, train, bus. (Tickets are often purchased ahead of time, though the service has not yet been provided.) Unearned revenue is a liability, since an OBLIGATION to perform a duty has been created. Using an example above, a customer may give a retainer of $5,000. This is in essence a prepayment of $5,000 for services that must be rendered in the future. The attorney books the unearned revenue, but now has a liability (the in the form of a
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Week 3 discussion questions - Week 3 discussion questions...

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