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A customer pays a $9,000 deposit before the contractor has earned the revenue. How should the deposit be classified initially?

Correct Answer

A) Liability for unearned revenue.

A customer deposit received before performance is initially a liability, often called unearned revenue or customer deposit.

Answer Options
A
Liability for unearned revenue.
B
Immediate gross profit in full.
C
Owner's personal equity withdrawal.
D
Bad-debt expense.

Why This Is the Correct Answer

A customer deposit received before performance is initially a liability, often called unearned revenue or customer deposit.

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