Creative Computing sells a tablet computer called the Protab. The $740 sales price of a Protab Package
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Question:
Creative Computing sells a tablet computer called the Protab. The $740 sales price of a Protab Package includes the following:
- One Protab computer.
- A six-month limited warranty. This warranty guarantees that Creative will cover any costs that arise due to repairs or replacements associated with defective products for up to six months.
- A coupon to purchase a Creative Probook e-book reader for $400, a price that represents a 50% discount from the regular Probook price of $800. It is expected that 20% of the discount coupons will be utilized.
- A coupon to purchase a one-year extended warranty for $65. Customers can buy the extended warranty for $65 at other times as well. Creative estimates that 40% of customers will purchase an extended warranty.
- Creative does not sell the Protab without the limited warranty, option to purchase a Probook, and the option to purchase an extended warranty, but estimates that if it did so, a Protab alone would sell for $720.
All Protab sales are made in cash.
Required:
1. & 2. Indicated below whether each item is a separate performance obligation and allocate the transaction price of 100,000 Protab Packages to the separate performance obligations in the contract.
3. Prepare a journal entry to record sales of 100,000 Protab Packages (ignore any sales of extended warranties).
Related Book For
Intermediate Accounting
ISBN: 978-1259548185
8th edition
Authors: David Spiceland, James Sepe, Mark Nelson, Wayne Thomas
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