Question

Denny 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 $900,000 at December 31, 2011 before year-end adjustment. Service contracts still outstanding at December 31, 2011 expire as follows:

Service contracts still outstanding at December 31, 2011 expire as follows:

During 2012 $190,000

During 2013 $285,000

During 2014 $125,000

What amount should be reported as Unearned Service Revenues in Denny's December 31, 2011 balance sheet?

a. $900,000

b. $600,000

c. $1,500,000

d. $300,000

Answer 1

b. $600,000

Step-by-step explanation:

Amount to be reported = Outstanding service contracts for 2012, 2013 and 2014

=$190,000 + $285,000 + $125,000

=$600,000

$600,000 should be reported as unearned service revenues in Denny's Co. December 31, 2015 balance sheet.