All else equal, a large increase in deferred revenue in the current period would be expected to produce what effect on revenue in a future period? Multiple Choice Large decrease, because deferred revenue indicates collection problems that will reduce net revenues in future periods. Large decrease, because deferred revenue implies that less revenue has been earned, which reduces future revenue. No effect, because deferred revenue is a liability, so payment will use assets rather than providing revenue. Large increase, because deferred revenue becomes revenue when the seller has satisfied its performance obligations.

Question

Layla Suarez

Business

3 September, 15:28

All else equal, a large increase in deferred revenue in the current period would be expected to produce what effect on revenue in a future period? Multiple Choice Large decrease, because deferred revenue indicates collection problems that will reduce net revenues in future periods. Large decrease, because deferred revenue implies that less revenue has been earned, which reduces future revenue. No effect, because deferred revenue is a liability, so payment will use assets rather than providing revenue. Large increase, because deferred revenue becomes revenue when the seller has satisfied its performance obligations.

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Caitlin · Answer 1

Large increase, because deferred revenue becomes revenue when the seller has satisfied its performance obligations

Explanation:

Deferred revenue also known as unearned revenue, is a liability that represents products or services that are owed to a customer because those have been collected in advance. Once the product or service is delivered over time, it turns into revenues in the income statement.