Kikiam Company sells equipment service contracts that cover a two-year period. The sales price of each contract is P4,000. Kikiam Company’s past experience shows that of the total pesos spent for repairs in service contracts, 40% in incurred evenly during the first contract year and 60% evenly during the second contract year. Kikiam Company sold 1,500 contracts evenly throughout 2020 and 900 contracts evenly throughout 2021. How much should Kikiam Company report as contract service revenue for the year ended December 31, 2021?
Kikiam Company sells equipment service contracts that cover a two-year period. The sales price of each contract is P4,000. Kikiam Company’s past experience shows that of the total pesos spent for repairs in service contracts, 40% in incurred evenly during the first contract year and 60% evenly during the second contract year. Kikiam Company sold 1,500 contracts evenly throughout 2020 and 900 contracts evenly throughout 2021. How much should Kikiam Company report as contract service revenue for the year ended December 31, 2021?
Chapter5: Introduction To Business Expenses
Section: Chapter Questions
Problem 63P
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Question
Kikiam Company sells equipment service contracts that cover a two-year period. The sales price of each contract is P4,000. Kikiam Company’s past experience shows that of the total pesos spent for repairs in service contracts, 40% in incurred evenly during the first contract year and 60% evenly during the second contract year. Kikiam Company sold 1,500 contracts evenly throughout 2020 and 900 contracts evenly throughout 2021.
How much should Kikiam Company report as contract service revenue for the year ended December 31, 2021?
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