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 $420, a price that represents a 30% discount from the regular Probook price of $600. It is expected that 20% of the discount coupons will be utilized. . A coupon to purchase a one-year extended warranty for $45. Customers can buy the extended warranty for $70 at other times if they do not use the $45 coupon. Creative estimates that 35% 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 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. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Indicate 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. Item Description Protab tablet Limited 6-month warranty Option to purchase a Probook Option to purchase extended warranty Total stand-alone price Protab tablet Item Description Limited 6-month warranty Option to purchase a Probook Option to purchase extended warranty Total contract price Performance Obligation? Stand-Alone Price Percentage of Total Stand-Alone Price Percentage of Total Stand- Alone Price x Total Transaction = Price Allocated Contract Price
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 $420, a price that represents a 30% discount from the regular Probook price of $600. It is expected that 20% of the discount coupons will be utilized. . A coupon to purchase a one-year extended warranty for $45. Customers can buy the extended warranty for $70 at other times if they do not use the $45 coupon. Creative estimates that 35% 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 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. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Indicate 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. Item Description Protab tablet Limited 6-month warranty Option to purchase a Probook Option to purchase extended warranty Total stand-alone price Protab tablet Item Description Limited 6-month warranty Option to purchase a Probook Option to purchase extended warranty Total contract price Performance Obligation? Stand-Alone Price Percentage of Total Stand-Alone Price Percentage of Total Stand- Alone Price x Total Transaction = Price Allocated Contract Price
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 $420, a price that represents a 30% discount from the regular Probook
price of $600. It is expected that 20% of the discount coupons will be utilized.
. A coupon to purchase a one-year extended warranty for $45. Customers can buy the extended warranty for $70 at other times if
they do not use the $45 coupon. Creative estimates that 35% 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 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.
Complete this question by entering your answers in the tabs below.
Req 1 and 2
Req 3
Indicate 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.
Item Description
Protab tablet
Limited 6-month warranty
Option to purchase a Probook
Option to purchase extended warranty
Total stand-alone price
Protab tablet
Item Description
Limited 6-month warranty
Option to purchase a Probook
Option to purchase extended warranty
Total contract price
Performance
Obligation?
Stand-Alone Price
Percentage of Total
Stand-Alone Price
Percentage of
Total Stand-
Alone Price
x
Total Transaction =
Price
Allocated Contract
Price
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