You are an auditor who has conducted a review of your client, whose balance sheet information included:

		As originally stated
Total Current assets		20,936
Total Assets		22,958
Total Current Liabilities		20,020
Total Liabilities		31,069
Total Stockholders' Deficit		(8,111)
Total liabilities and stockholders deficit		22,958

You determine that the client misclassified $4,902,000 of current deferred revenue as long-term deferred revenue in their last filing. Specifically, the company previously reported $15,079,000 in current deferred revenues and $10,705,000 in long-term deferred revenues, but should have recorded $19,981,000 and $5,803,000 in current and long term respectively.

The CEO of the company has very little accounting knowledge and the CFO he hired to focus on the business side of things quit last week. You must explain to the CEO (very smart, but not well versed in accounting lingo) in a 3 paragraph memo what the problem is (begin by explaining what deferred revenue is, and what gives rise to it), how the misclassification affects their financial statements (Be specific! Focus on how it changes different categories, interpretation, and totals), and what must be done to remedy the problem (include what the corrected financial information would look like).