What amount should be reported as unearned service contract revenues in Smith’s December 31, 2013 balance sheet?

What amount should be reported as unearned service contract revenues in Smith’s December 31, 2013 balance sheet?

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?


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