Denny 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 credited to Unearned Service Revenues. This account had a balance of $900,000 at December 31, 2011 before year-end adjustment.
Service contracts still
outstanding at December 31, 2011 expire as follows:
During 2012 During 2013 During 2014
$190,000 285,000 125,000
What amount should be reported as Unearned Service Revenues in Denny’s December 31, 2011 balance sheet?
a) $900,000 b) $600,000 c) $1,500,000 d) $300,000