Cobb Company sells appliance service contracts to repair appliances for a two-year period. Cobb's past experience is that, of the total amount spent for repairs on service contracts, 40% is incurred evenly during the first contract year and 60% evenly during the second contract year. Receipts from service contract sales for the two years ended December 31, 1998 are $250,000 in 1997 and $300,000 in 1998. Receipts from contracts are credited to unearned service contract revenue. Assume that all contract sales are made evenly during the year. What amount should Cobb report as unearned service contract revenue at December 31, 1998?
a. $180,000.
b. $235,000.
c. $240,000.
d. $315,000.