Question

Glen Arbor Corporation sells DVD players. The corporation also offers its customers a 4-year service-type warranty contract. On 1/1/24, Glen Arbor sold 20,000 warranty contracts at $99 each and spent $180,000 servicing warranties during 2024 and $200,000 servicing warranties in 2025. Estimated warranty expense for the four-year period is $800,000. The Sales Warranty (Deferred Revenue) approach is applicable. Assume straight-line amortization. What is the Unearned Warranty Revenue balance at 12/31/25

Answer 1

the balance of unearned revenue as on Dec 31 25 is $990,000

Step-by-step explanation:

The computation of the balance of unearned revenue as on Dec 31 25 is as follows:

= Opening balance - amortization for the year 2024 - amortization for the year 2025

= (20,000 × $99) - ((20,000 × $99) ÷ 4 years) - ((20,000 × $99) ÷ 4 years)

= $1,980,000 - $495,000 - $495,000

= $990,000

hence, the balance of unearned revenue as on Dec 31 25 is $990,000