Davidson Company sells office equipment service contracts agreeing to service equipment for a two-year period. Cash receipts from contracts are credited to unearned service contract revenue and service contract costs are charged to service contract expense as incurred. Revenue from service contracts is recognized as earned over the lives of the contracts. Additional information for the year ended December 31, 2020, is as follows:

Unearned service contract revenue, @ 1/1/20 $600,000

Cash Receipts from service contracts sold 980,000

Service contract revenue recognized 860,000

Service contract expense 520,000

What amount should Davidson report as unearned service contract revenue at December 31, 2020?

a. $460,000 c. $490,000

b. $480,000 d. $720,000

On July 1, 2019, Greany Corporation approved a formal plan to sell its plastics division, considered a segment of the business and a strategic shift for the company. The sale will occur in the first three months of 2020. The division had an operating loss of $400,000 for the six months ended December 31, 2019, and expects to incur a loss of $200,000 for the first quarter of 2020. The sales price is $22,000,000 and the carrying value at the date of sale should be $20,000,000. Greanys effective tax rate for 2019 is 40%. For the year ended December 31, 2019, how much gain should Greany report on the discontinued operations of its plastics division?

a. $0 c. $1,080,000

b. $840,000 d. $1,200,000

In May 2017 Luba Company filed suit against Mullins Corp., seeking to recover $1,000,000 for copyright infringement. A court verdict rendered in September 2020 awarded Luba $700,000 in damages. Mullins appealed the verdict but a final decision is not expected before October 2021. Thus, no payment has been made yet to Luba. Lubas legal counsel believes it is probable that Luba will be successful against Mullins for an estimated amount of $500,000. What amount should Luba accrue by a credit to income in the year ended December 31, 2020?

a. $0 c. $600,000

b. $500,000 d. $700,000

Gagne Construction Company contract requires the construction of a bridge on a customers land in three years. The expected total cost of the bridge is $2,000,000, and Gagne will receive contract price of $2,500,000 for the project. The actual costs incurred to complete the project were $500,000, $900,000, and $600,000, respectively, during each of the three years. Assuming that the cost-to-cost method was incurred to measure progress toward completion of the project, what amount of gross profit would Gagne report during the last year of the project?

a. $120,000 c. $140,000

b. $125,000 d. $150,000