Extended service contracts on electronic equipment

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Reference no: EM13787715

Warranty4U provides extended service contracts on electronic equipment sold through major retailers. The standard contract is for 3 years. During the current year, Warranty4U provided 21,000 such warranty contracts at an average price of $81 each. Related to these contracts, the company spent $200,000 servicing the contracts during the current year and expects to spend $1,050,000 more in the future. What is the net profit that the company will recognize in the current year related to these contracts?

$451,000

$1,501,000

$150,333

$367,000

Reference no: EM13787715

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