Greene Company sells office equipment service contrac agreeing to service equipment for a two-year period. Ca receipts from contracts are credited to unearned contra revenue. Service contract costs are charged to service contr: Ovn engo
Greene Company sells office equipment service contrac agreeing to service equipment for a two-year period. Ca receipts from contracts are credited to unearned contra revenue. Service contract costs are charged to service contr: Ovn engo
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 1-18 (AICPA Adapted)
Greene Company sells office equipment service contracts
agreeing to service equipment for a two-year period. Cash
receipts from contracts are credited to unearned contract
revenue. Service contract costs are charged to service contract
expense as incurred. Revenue from service contracts is
recognized as earned over the term of the contracts.
Unearned contract revenue at January 1
Cash receipts from service contracts sold
Service contract revenue recognized
Service contract expense
600,000
980,000
860,000
520,000
What is unearned service contract revenue on December 31?
a. 460,000
b. 480,000
c. 490,000
d. 720,000.
Transcribed Image Text:Problem 1-19 (AICPA Adapted)
Ryan Company sells major household appliance service
contracts for cash. The service contracts are for a one-year,
two-year, or three-year period. Čash receipts from contracts
are credited to unearned contract revenue. This account had
a balance of P720,000 on December 31, 2020 before year-end
adjustment. Service contract costs are charged as incurred
to service contract expense account which had a balance of
P180,000. Outstanding servicé contracts on December 31,
2020 expire during 2021 P150,000, during 2022 P225,000 and
during 2023 P100,000.
What amount should be reported as unearned contract
revenue on December 31, 2020?
а. 540,000
b. 475,000/
с. 295,000
d. 245,000
25
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