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    Unearned Contract Revenues

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    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?
    a) 360,000
    b) 330,000
    c) 240,000
    d) 220,000

    © BrainMass Inc. brainmass.com June 4, 2020, 2:32 am ad1c9bdddf
    https://brainmass.com/business/business-law/unearned-service-contract-revenues-464795

    Solution Summary

    The solution provides the exact calculation to determine the correct amount of unearned service contract revenues for Felton Co.

    $2.19

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