Exercise $6-6($Algo$)$ Performance obligations; customer option for additional goods or services; residual

method LO$6-2,6-4,6-5,6-6]$

Clarks Incorporated, a shoe retailer, sells boots in different styles. In early November the company starts selling "SunBoots" to

customers for $$75$ per pair. When a customer purchases a pair of SunBoots, 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 $$100.$

Required:

How many performance obligations are in a contract to buy a pair of SunBoots?

Assume Clarks cannot estimate the stand$-$alone selling price of a pair of SunBoots sold without a coupon. Prepare a journal entry

to record revenue for the sale of $1,400$ pairs of SunBoots, assuming that Clarks uses the residual method to estimate the stand$-$

alone selling price of SunBoots sold without the discount coupon.

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How many performance obligations are in a contract to buy a pair of SunBoots?