Bugs Appliance Company's accountant has been reviewing the fir's past television sales. For the past years, Bugs 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 P600.Information concerning past television and warranty contract sales is given below:

2009 2008

Television sales in units 550 460

Sales price per unit P 5,000 P 4,000

Number of service contracts sold 350 300

Expenses relating to television warranties P38,520 P13,400

BUGS' accountant has estimated from past records that the pattern of repairs has been 40% in the year of sale, 36% first year after sale and 24% on 2nd year of sale. Sales of the contracts are made evenly during the year.

Question 1: What is the adjusted balance of the unearned service contract as of December 31, 2009?

Question 2: How much profit on service contract would be recognized in year 2009?