Hitech Appliance Company's accountant has been reviewing the firm's past television sales. For the past two years, Hitech has been offering an extended service contract on all televisions sold. With the purchase of a television, the customer has the right to purchase a 3-year service contract for an extra $75. Information concerning past television and warranty contract sales follows.

Hitech's accountant has estimated from past records that the pattern of repairs has been 32% in the first year after sale, 40% in the second year, and 28% in the third year. Give the necessary journal entries related to the service contracts for 2010 and 2011. In addition, indicate how much profit on service contracts would be recognized in 2011. Assume sales of the contracts are made evenly during theyear.

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2011 2010 Plasma-All Model II Television Televislon sales in units Sales price per unit Number of service contracts sold Expenses relating to television warranties 700 $900 420 58,250 590 $900 380 $4,240