Problem 1-18 (AICPA Adapted)

Greene Company sells office equipment service contracts agreeing to service equipment
for a two-year period. Cash receipts from contracts are credited to unearned contract
revenue. Service contract costs are charged to service contract expense as incurred.
Revenue from service contracts is recognized as earned over the term of the contracts.

Unearned contract revenue at January 1 600,000

Cash receipts from service contracts sold 980,000
Service contract revenue recognized 860,000
Service contract expense 520,000

What is unearned service contract revenue on December 31?

a. 460,000 b. 480,000 c. 490,000 d. 720,000

Problem 1-19 (AICPA Adapted)

Ryan Company 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 contract revenue. This account had a balance of P720,000 on
December 31, 2020 before year-end adjustment. Service contract costs are charged as
incurred to service contract expense account which had a balance of P180,000.
Outstanding service contracts on December 31, 2020 expire during 2021 P150,000, during
2022 P225,000 and during 2023 P100,000.

What amount should be reported as unearned contract revenue on December 31, 2020?
a. 540,000 b. 475,000 c. 295,000 d. 245,000