Modem Appliance Company's accountant has been reviewing the firms past television sales. For the past 2 years, Modern has been offering a special service warranty on all televisions sold. With the purchase of a television, the customer has the right to purchase a 3-year service contract for an extra \($60.\) Information concerning past television and warranty contract sales is given below.

Modems accountant has estimated from past records that the pattern of repairs has been 40% in the first year after sale, 36% in the second year, and 24% in the third year Give the necessary journal entries related to the service contracts for 2001 and 2002. In addition, indicate how much profit on service contracts would be recognized in 2002. Assume sales of the contracts are made evenly during the year.

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Color-All Model II Television 2002 2001 Television sales in units 550 460 Sales price per unit. $500 $400 Number of service contracts sold 350 300 Expenses relating to television warranties. $9,630 $3,350