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

question 56

Multiple Choice

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, 2010, 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, 2010. Service contracts still outstanding at December 31, 2010, expire as follows:

What amount should be reported as unearned service contract revenues in Chips-n-Bits December 31, 2010, balance sheet?

• A) $49,000
• B) $59,000
• C) $95,000
• D) $108,000

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