Dexter Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to unearned service contract revenues. This account had a balance of $480,000 at December 31, 2008 before year-end adjustment. Service contract costs are charged as incurred to the service contract expense account, which had a balance of $120,000 at December 31, 2008. Outstanding service contracts at December 31, 2008 expire as follows:
What amount should be reported as unearned service contract revenues in Dexter's December 31, 2008 balance sheet?
A) $360,000
B) $330,000
C) $240,000
D) $220,000

Question

Dexter Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to unearned service contract revenues. This account had a balance of $480,000 at December 31, 2008 before year-end adjustment. Service contract costs are charged as incurred to the service contract expense account, which had a balance of $120,000 at December 31, 2008. Outstanding service contracts at December 31, 2008 expire as follows:
 What amount should be reported as unearned service contract revenues in Dexter's December 31, 2008 balance sheet?
A) $360,000 
B) $330,000 
C) $240,000 
D) $220,000

Quizplus · Accepted Answer

$100,000 + $160,000 + $70,000 = $330,000.

Dexter Co Sells Major Household Appliance Service Contracts for Cash