Which of the following is correct?
A)Unearned revenues are considered increases to stockholders' equity.
B)Working capital is measured as current liabilities minus current assets.
C)Working capital increases when a company pays the principal on a long-term note.
D)Unearned revenues will eventually become revenue earneD.Unearned revenues are considered a liability account until the company has provided the services at which time the revenue will be recognized.

Question

Quizplus · Accepted Answer

Unearned revenues are considered a liability account until the company has provided the services at which time the revenue will be recognized as earned revenue on the income statement. Therefore, option D is correct. Option A is incorrect because unearned revenue is a liability account, not an increase to stockholders' equity. Option B is incorrect because working capital is measured as current assets minus current liabilities, not the other way around. Option C is incorrect because paying the principal on a long-term note reduces cash and liabilities but does not affect working capital.

Which of the Following Is Correct