Creative Computing sells a tablet computer called the Protab. The $780 sales price of a Protab Package includes the following: One Protab computer. A 6-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 $450, a price that represents a 40% discount from the regular Probook price of $750. 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 $110 at other times if they do not use the $65 coupon. Creative estimates that 30% 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 $760. Required: 1. & 2. Indicate below whether each item is a separate performance obligation and allocate the transaction price of 95,000 Protab Packages to the separate performance obligations in the contract. 3. Prepare a journal entry to record sales of 95,000 Protab Packages.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Creative Computing sells a tablet computer called the Protab. The $780 sales price of a Protab Package includes the following:

One Protab computer.
A 6-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 $450, a price that represents a 40% discount from the regular Probook price of $750. 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 $110 at other times if they do not use the $65 coupon. Creative estimates that 30% 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 $760.

Required:
1. & 2. Indicate below whether each item is a separate performance obligation and allocate the transaction price of 95,000 Protab Packages to the separate performance obligations in the contract.
3. Prepare a journal entry to record sales of 95,000 Protab Packages.

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