Question

Blueberry is a consumer technology company that reported the following financials (values in millions):2017 2018Revenue $851 $943Deferred Revenue (ending balance) $347 $6681. Which of the following statements about the reason for the increase in deferred revenue from 2017 to 2018 is most plausible?A. More revenue was recognized than cash was collected during 2018.B. More gift cards have been redeemed than sold during 2018.C. Lower number of prepaid streaming service subscriptions were sold during 2018.D. A higher number of smartphone extended warranty contracts were sold during 2018.

Answer 1

Answer:

D. A higher number of smartphone extended warranty contracts were sold during 2018.

Explanation:

                                                                  2017              2018

Revenue                                                   $851              $943

Deferred Revenue (ending balance)     $347              $668

Deferred revenue refers to the money a company receives from clients as prepaid services, which creates a liability to the company. The liability is generally reported as unearned revenue and must be accrued as the service is provided.

The only option that can result in an increase of unearned revenue is the sale of extended warranties that last more than a year.