Question

An automobile dealer sells service contracts. The contracts stipulate that the dealer will perform specific repairs on covered vehicles. The contracts vary in length from 12 to 36 months. Do the following increase when service contracts are sold?deferred revenue / service revenue
a. yes nob. yes yesc. no nod. no yes

Answer 1

Answer:

a. yes no

Explanation:

At the time of contract the service revenue is not been realized because service is been perform and dealer made a promise to perform services in future. So the revenue will be deferred and will be earned or realized when service will be performed in the future. Deferred revenue will be effected and service revenue will not be effected at the time of contract.