Which of the following is an example of a vertical merger? Northwestern Idaho University merging with McDonald's. Northwestern Idaho University merging with Roosevelt University. Northwestern Idaho University going from a public to a private university. Northwestern Idaho University merging with a training academy for new professors.

Northwestern Idaho University merging with a training academy for new professors.

Explanation: This option is the only example of a vertical merger. There are different types of mergers and acquisitions in business and each instance is for a different kind of economic benefit. A vertical merger occurs when an organization acquires or purchases another organization involved in the same line of business or service but at different stages/levels of the supply chain for the same product or service. The main purpose is usually to reduce cost of production and improve economic efficiency. A good illustration would be that of a chocolate producer and a cocoa farmer. The cocoa farmer provides the raw materials while the chocolate producer produces the final product for consumption. The chocolate producer might buy up the cocoa farm so that the cost of cultivating and harvesting cocoa and then the cost of producing chocolate from these would be wrapped up in one single organization.

The same applies to the university and the training academy. The end product are the qualified professors as far as both organizations are concerned. The training academy trains the professors and the university employs them afterwards to provide quality education to the university community. Northwestern Idaho can decide to merge with the training academy so that the cost of training and then employing the professors would be taken up by one single organization and that would result in a reduction of cost (as compared to when it’s taken up by two separate organizations).

And then, there would be improved efficiency as the university would not only undertake the training of the professors, but now the training can be tailored to their own specific needs and requirements, which would translate into better efficiency.

The required adjusting entry will be; Debit unearned revenue for 16,200 and Credit revenue for 16,200. An unearned or deferred revenue is classified as profit but it is listed on the liability on the balance sheet until it has been delivered or has been performed the services.