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Exercise 6-6 (Algo) Performance obligations; customer option for additional goods or services [L06-2, 6-4, 6-5] Clarks Inc., a shoe retailer, sells boots in different styles. In early November the company starts selling SunBoots to customers for $70 per pair. When a customer purchases a pair of SunBaots, Clarks also gives the customer a 30% discount coupon for any additional future purchases made in the next 30 days. Customers can't obtain the discount coupon otherwise. Clarks anticipates that approximately 20% of customers will utilize the coupon, and that on average those customers will purchase additional goods that normally sell for $150. Required: 1. Prepare a journal entry to record revenue for the sale of 1,100 pairs of SunBoots, assuming that Clarks uses the residual method to estimate the stand-alone selling price of SunBoots,sold without the discount coupon. No Transaction General Journal Debit Credit 1 Cash correct 77,000 correct Sales revenues correct 70,400incorrect 6,600 incorrect Deferred revenue incorrect Exercise 6-7 (Algo) Performance obligations; customer option for additional goods or services; prepayment [LO6-3, 6-4, 6-5] A New York City daily newspaper called Manhattan Today' charges an annual subscription fee of $108. Customers prepay their subscriptions and receive 260 issues over the year. To attract more subscribers, the company offered new subscribers the ability to pay $110 for an annual subscription that also would include a coupon to receive a 40% discount on a one-hour ride through Central Park in a horse-drawn carriage. The list price of a carriage ride is $100 per hour. The company estimates that approximately 30% of the coupons will be redeemed. Required: 1. Prepare the journal entry to recognize sale of 14 new subscriptions, clearly identifying the revenue or deferred revenue associated with each performance obligation. No Transaction General Journal Debit Credit A 1 Cash correct 1,540 correct Deferred revenue - coupons correct 1,540 incorrect incorrect incorrect