Yurman Co sells major household appliance service contracts

Yurman 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 $960,000 at December 31, 2016 before year-end adjustment. Service contract costs are charged as incurred to the service contract expense account, which had a balance of $240,000 at December 31, 2016. Outstanding service contracts at December 31, 2016 expire as follows:
During 2017 During 2018 During 2019
$200,000 $320,000 $140,000
What amount should be reported as unearned service contract revenues in Yurman\'s December 31, 2016 balance sheet?
a. $720,000.
b. $660,000.
c. $480,000.
d. $440,000.

Solution

SOLUTION

$660,000 should be reported as unearned service contract revenues in Yurman\'s December 31, 2016 balance sheet.

Amount to be reported =

= $200,000 + $320,000 + $140,000

= $660,000