10.Sariaya Company sells office equipment service contracts agreeing to service equipment for a two-year period. Cash receipts from contracts are credited to unearned service contract revenue and service contract costs are charged to service contract expense as incurred. Revenue from service contracts is recognized as earned over lives of the contracts. Information for the year 2005 is as follows: Unearned service contract revenue – 1/1/2005 Cash receipts from service contracts sold Service contract revenue recognized Service contract expense 3,000,000 5,000,000 4,500,000 2,500,000 What amount should Sariaya report as unearned service contract revenue at December 31, 2005? a. 3,500,000 b. 1,000,000 c. 2,000,000 d. 500,000

10.Sariaya Company sells office equipment service contracts agreeing to service equipment for a two-year period. Cash receipts from contracts are credited to unearned service contract revenue and service contract costs are charged to service contract expense as incurred. Revenue from service contracts is recognized as earned over lives of the contracts. Information for the year 2005 is as follows: Unearned service contract revenue – 1/1/2005 Cash receipts from service contracts sold Service contract revenue recognized Service contract expense 3,000,000 5,000,000 4,500,000 2,500,000 What amount should Sariaya report as unearned service contract revenue at December 31, 2005? a. 3,500,000 b. 1,000,000 c. 2,000,000 d. 500,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Solve and explain why it is the answer.
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