Which of the following situations may give rise to unearned revenue?
A) Providing trade credit to customers.
B) Selling inventory.
C) Selling magazine subscriptions.
D) Providing manufacturer warranties.

Question

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Selling magazine subscriptions may give rise to unearned revenue because the customers may pay in advance for a subscription period that is yet to be fulfilled. The publisher will then recognize the revenue as earned over the course of the subscription period rather than all at once at the time of sale.

The other choices do not give rise to unearned revenue:
A) Providing trade credit to customers is an extension of credit and not a revenue recognition issue. 
B) Selling inventory would give rise to revenue immediately upon sale. 
D) Providing manufacturer warranties is not a sale of goods or services and thus not a revenue recognition issue.

Which of the Following Situations May Give Rise to Unearned