Eaton 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 Revenues. This account had a balance of $1,800,000 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 $450,000 at December 31, 2008.
Service contracts still outstanding at December 31, 2008 expire as follows:
What amount should be reported as Unearned Service Revenues in Eaton's December 31, 2008 balance sheet?

Question

Eaton 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 Revenues. This account had a balance of $1,800,000 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 $450,000 at December 31, 2008.
Service contracts still outstanding at December 31, 2008 expire as follows:
 What amount should be reported as Unearned Service Revenues in Eaton's December 31, 2008 balance sheet?

Quizplus · Accepted Answer

$380,000 + $570,000 + $350,000 = $1,300,000

Eaton Co Sells Major Household Appliance Service Contracts for Cash