What is the adjusted balance of the unearned service

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Question - BUGS Appliance Company's accountant has been reviewing the firm's past television sales. For the past years, BUGS has been offering a special service warranty on all televisions sold. With the purchase of a television, the customer has the right to purchase a 3-year service contract for an extra P600.

Information concerning past television and warranty contract sales is given below:

 

2007

2006

Television sales in units

550

460

Sales price per unit

P5,000

P4,000

Number of service contracts sold

350

300

Expenses relating to television warranties

38,520

13,400

BUGS' accountant has estimated from past records that the pattern of repairs has been 40% in the year of sale, 36% first year after sale and 24% on 2nd year of sale. Sales of the contracts are made evenly during the year.

Required - What is the adjusted balance of the unearned service contract as of December 31, 2007?

a. 111,600

b. 168,600

c. 211,200

d. 243,600

Reference no: EM132647331

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