Solution-What amount should be reported as unearned service

What amount should be reported as unearned service contract

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Q1. Bonita Industries 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 $957000 at December 31, 2019 before year-end adjustment. Service contract costs are charged as incurred to the service contract expense account, which had a balance of $245000 at December 31, 2019. Outstanding service contracts at December 31, 2019 expire as follows:

During 2020	During 2021	During 2022
$198000	$317000	$140000

What amount should be reported as unearned service contract revenues in Bonita's December 31, 2019 balance sheet?

Q2. During 2020, Bramble Corp. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 4% within 12 months following sale and 4% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2020 and 2021 are as follows:

	Sales	Actual Warranty Expenditures
2020	$800000	$12200
2021	1006000	35000
	$1806000	$47200

At December 31, 2021, (assuming the accrual method) Bramble should report an estimated warranty liability of?

Reference no: EM133052271

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What amount should be reported as unearned service contract

Reference no: EM133052271

Reference no: EM133052271

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