Problem 5-234

Assume that a customer enrolls in AAAs Premier Membership, which provides 12 months of roadside assistance for $120. On August 1, 2018, a customer purchases a contract that runs from that date through July 31, 2019. Given that roadside assistance requests occur equally throughout the contract period, AAA uses proportion of time as its measure of progress toward completion. Required: 1. Prepare the journal entries that AAA would record on August 1 and on December 31, 2018, with respect to this transaction. 2. State the amounts included in relevant accounts in AAAs 2018 income statement and balance sheet.