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What is the adjusted balance of unearned service contract

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Reference no: EM132620034

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.

                                                               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.

Question 1: What is the adjusted balance of the unearned service contract as of December 31, 2007?

Reference no: EM132620034

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