Abson Corporation began business on January 1, 2013, selling copiers. It also sells service contracts to maintain and repair copiers for $600 per year. When a customer signs a service contract, Abson collects the $600 fee and credits Service Contract Fees Received in Advance. Abson recognizes revenues on a quarterly basis during the year of coverage. For purposes of computing revenue, Abson assumes that all sales of service contracts occur midway through each quarter. Sales of contracts and service expenses for 2013 appear in the following table:

a. Prepare journal entries for the first three quarters of 2013 for Abson Corporation. Assume that the firm prepares quarterly reports on March 31, June 30, and September 30, 2013.

b. What is the balance in the Service Contract Fees Received in Advance account on December 31,2013?

Transcribed Image Text:

Service Expenses Sales of Contracts Second Quarter. . Third Quarter . . . . ...300,000 (500 contracts) . 71,000 240,000 (400 contracts) 105,000 120,000 (200 contracts) 130,000