Chips-n-Bits Company sells service contracts for personal computers.The service contracts are for a one-year,two-year,or three-year period.All sales are for cash and all receipts are credited to Unearned Service Contract Revenues.This account had a balance of $144,000 at December 31,2012,before year-end adjustment.Service contract costs are charged as incurred to the Service Contract Expense account,which had a balance of $36,000 at December 31,2012.Service contracts still outstanding at December 31,2012,expire as follows:

What amount should be reported as unearned service contract revenues in Chips-n-Bits December 31,2012,balance sheet?
A)$49,000
B)$59,000
C)$95,000
D)$108,000

Question

Chips-n-Bits Company sells service contracts for personal computers.The service contracts are for a one-year,two-year,or three-year period.All sales are for cash and all receipts are credited to Unearned Service Contract Revenues.This account had a balance of $144,000 at December 31,2012,before year-end adjustment.Service contract costs are charged as incurred to the Service Contract Expense account,which had a balance of $36,000 at December 31,2012.Service contracts still outstanding at December 31,2012,expire as follows:

What amount should be reported as unearned service contract revenues in Chips-n-Bits December 31,2012,balance sheet?

What amount should be reported as unearned service contract revenues in Chips-n-Bits December 31,2012,balance sheet?
A)$49,000 
B)$59,000 
C)$95,000 
D)$108,000

Quizplus · Accepted Answer

To determine the unearned service contract revenues, we need to subtract the service contract costs from the balance of Unearned Service Contract Revenues.
Unearned Service Contract Revenues at 12/31/2012 = $144,000
Service Contract Expense at 12/31/2012 = $36,000
Unearned Service Contract Revenues (adjusted) = $144,000 - $36,000 = $108,000
Therefore, the correct answer is option D) $108,000.

Chips-N-Bits Company Sells Service Contracts for Personal Computers