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    Ia2 Prob 1-20 & 21

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    maryani
    Dunne Company sells two-year equipment service contracts for $600 each. It sold 1,000 contracts evenly throughout 2020. Based on past experience, 40% of repair costs are incurred in the first year and 60% in the second year. Cobra Company also sells two-year appliance service contracts. It received $500,000 in 2020 and $600,000 in 2021 from contract sales. Based on past experience, 40% of repair costs are incurred in the first contract year and 60% in the second year. Receipts from contract sales are credited to unearned service revenue.

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    Ia2 Prob 1-20 & 21

    Uploaded by

    maryani
    198 views2 pages
    Dunne Company sells two-year equipment service contracts for $600 each. It sold 1,000 contracts evenly throughout 2020. Based on past experience, 40% of repair costs are incurred in the first year and 60% in the second year. Cobra Company also sells two-year appliance service contracts. It received $500,000 in 2020 and $600,000 in 2021 from contract sales. Based on past experience, 40% of repair costs are incurred in the first contract year and 60% in the second year. Receipts from contract sales are credited to unearned service revenue.

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    ia2 prob 1-20 & 21

    Original Title

    ia2 prob 1-20 & 21

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    Dunne Company sells two-year equipment service contracts for $600 each. It sold 1,000 contracts evenly throughout 2020. Based on past experience, 40% of repair costs are incurred in the first year and 60% in the second year. Cobra Company also sells two-year appliance service contracts. It received $500,000 in 2020 and $600,000 in 2021 from contract sales. Based on past experience, 40% of repair costs are incurred in the first contract year and 60% in the second year. Receipts from contract sales are credited to unearned service revenue.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    198 views2 pages

    Ia2 Prob 1-20 & 21

    Uploaded by

    maryani
    Dunne Company sells two-year equipment service contracts for $600 each. It sold 1,000 contracts evenly throughout 2020. Based on past experience, 40% of repair costs are incurred in the first year and 60% in the second year. Cobra Company also sells two-year appliance service contracts. It received $500,000 in 2020 and $600,000 in 2021 from contract sales. Based on past experience, 40% of repair costs are incurred in the first contract year and 60% in the second year. Receipts from contract sales are credited to unearned service revenue.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Problem 1-20 (AICPA Adapted)

    Dunne Company sells equipment service contracts that a two-year period. The sale price
    of each contract is P600

    The past experience is that, of the total pesos spent to repairs on service contracts. 40% is
    incurred evenly dun the first contract year and 60% evenly during the second contract
    year.
    The entity sold 1,000 contracts evenly throughout 2020.

    1. What is the contract revenue for 2020


    a. 120,000 b. 240,000 c. 300,000 d. 150,000

    2. What amount should be reported as deferred service revenue on December 31, 2020?
    a. 540,000 b. 480,000 c. 360,000 d. 300,000

    3. What is the contract revenue for 2021?


    a. 180,000 b. 360,000 c. 300,000 d. 120,000

    4. What is the contract revenue for 2022?


    a. 240,000 b. 360,000 c. 180,000 d. 0

    Problem 1-21 (AICPA Adapted)


    Cobra Company sells appliance service contracts ageeing to repair appliances for two-
    year period.
    The past experience is that, of the total amount spent for repairs on service contracts, 40%
    is incurred evenly during the first contract year and 60% is incurred evenly during the
    second contract year.

    Receipts from service contract sales are P500,000 for 2020 and P600,000 for 2021.

    Receipts from contracts are credited to unearned service revenue. All sales are made
    evenly during the year.

    1. What is the contract revenue for 2020?

    a. 100,000 b. 200,000 c. 250,000 d. 500,000


    2. What is the unearned revenue on December 31, 2020?

    a. 300,000 b. 400,000 c. 200,000 d. 150,000

    3. What is the contract revenue for 2021?

    a. 240,000 b. 360,000 c. 370,000 d. 250,000

    4. What is unearned revenue on December 31, 2021?

    a. 360,000 b. 470,000 c. 480,000 d. 630,000

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