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Warranty4U provides extended service contracts on electronic equipment sold through major retailers. The standard contract is for three years. During the current year, Warranty4U provided 21,000 such warranty contracts at an average price of $81 each. Revenue is recognized each year using the straight-line method. Related to these contracts, the company spent $200,000 servicing the contracts during the current year and expects to spend $1,050,000 more in the future. What is the net profit that the company will recognize in the current year related to these contracts?

a. $451,000.

b. $567,000.

c. $150,333.

d. $367,000

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Accounting Basics, Accounting

Category:- Accounting Basics
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