Felton Co. sells major household appliance service contracts for cash. The service contracts are for a 1-year, 2-year, or 3-year period. Cash receipts from contracts are credited to unearned service contract revenues. This account had a balance of 480,000 on December 31, 2009 before year-end adjustment. Service contract costs are charged as incurred to the service contract expense account, which had a balance of 120,000 on December 31, 2009. Outstanding service contracts at December 31, 2009 expire as follows:
December 2010 - $100,000
December 2011 - $160,000
December 2012 - $70,000
What amount should be reported as unearned service contract revenues in Felton's December 31, 2009 balance sheet?
The solution provides the exact calculation to determine the correct amount of unearned service contract revenues for Felton Co.