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On January 1, 20X2, Dot Company sold a three-year, service-type extended warranty to Matrix Company for $36,000. The warranty took effect on the date of purchase (January 1, 20X2). What amount of Unearned Warranty Revenue should be reported on Dot's December 31, 20X3, Balance Sheet?

Answer :

jepessoa

Answer:

$12,000

Explanation:

The accrual principle of accounting states that revenue should be recorded on the period that they occur and not when the cash is received. In this case Dot Company only provided 1 year warranty to Matrix Company so they should record 1 year worth of revenue ($36,000 / 3 = $12,000).

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