Smith 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 credite
d to unearned service contract revenues. This account had a balance of
$480,000 at December 31, 2013 before year-end adjustment. Service
contract costs are charged as incurred to the service contract expense
account, which had a balance of $120,000 at December 31, 2013.
Outstanding service contracts at December 31, 2013 expire as follows:
During 2014 During 2015 During 2016
$100,000 $160,000 $70,000
What amount should be reported as unearned service contract revenues in Smith’s December 31, 2013 balance sheet?