Journal entries for service contracts. Abson Corporation began business on January 1. Abson sells copiers to business firms. It also sells service contracts to maintain and repair copiers for \(\$ 600\) per year. When a customer signs a contract, Abson collects the \(\$ 600\) fee and credits Service Contract Fees Received in Advance. Abson recognizes revenues on a quarterly basis during the year in which the coverage is in effect. 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 its first year of operations appear below:

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

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

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First Quarter.. Second Quarter 300,000 (500 contracts) Third Quarter 240,000 (400 contracts) Sales of Contracts $180,000 (300 contracts) Service Expenses $ 32,000 71,000 105,000 Fourth Quarter 120,000 (200 contracts) 130,000