Eaton Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to Unearned Service Revenues. This account had a balance of $1,800,000 at December 31, 2010 before year-end adjustment. Service contract costs are charged as incurred to the Service Contract Expense account, which had a balance of $450,000 at December 31, 2010. Service contracts still outstanding at December 31, 2010 expire as follows:During 2011 $380,000During 2012 570,000During 2013 350,000What amount should be reported as Unearned Service Revenues in Eaton's December 31, 2010 balance sheet? a. $1,350,000. b. $1,300,000. c. $850,000. d. $500,000.
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