FRA - Galaxy (Contribution to Gross Profit Qn)

CFA Level II
#1

I answered incorrectly that the contribution to gross profit is $4.8m as I included the $3m deposit as revenue on the P&L. Just to check my reasoning, is the below correct under the first Galaxy scenario of $3m unearned revenue?

P&L: unearned revenue so nothing reported on P&L

BS: cash increases by $3m, current liabs increase $3m to counterbalance. In future periods when revenue is earned, the unearned revenue account amortises over to P&L.

Thanks

#2

It may be a current liability or it may be a long-term liability, depending on how long they expect it will take to earn it.

Apart from that, you’re correct.

#3

Cheers Magician