Dunne Co. sells equipment service contracts that cover a twoyear period. The sales price of each contract is $600. Dunne's past experience is that, of the total dollars spent for repairs on service contracts, 40% is incurred evenly during the first contract year and 60% evenly during the second contract year. Dunne sold 1,000 contracts evenly throughout the 2020.
Dunne Co. sells equipment service contracts that cover a twoyear period. The sales price of each contract is $600. Dunne's past experience is that, of the total dollars spent for repairs on service contracts, 40% is incurred evenly during the first contract year and 60% evenly during the second contract year. Dunne sold 1,000 contracts evenly throughout the 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
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