Creative Computing sells a tablet computer called the Protab. The $890 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 $270, a price that represents a 40% discount from the regular Probook price of $450. It is expected that 25% 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 $95 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 $870. Required: 1. & 2. Indicate below whether each item is a separate performance obligation and allocate the transaction price of 96,000 Protab Packages to the separate performance obligations in the contract. 3. Prepare a journal entry to record sales of 96,000 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 96,000 Protab Packages to the separate performance obligations in the contract. Item Description Answer is not complete. Protab tablet Limited 6-month warranty Option to purchase a Probook Option to purchase extended warranty Total stand-alone price Performance Obligation? Yes No Yes Yes Percentage SA S S S Stand-Alone Price 83,520,000 0 6,480,000 X 0X 90,000,000 Percentage of Total Stand-Alone Price 92.80% 7.20% 100.00%
Creative Computing sells a tablet computer called the Protab. The $890 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 $270, a price that represents a 40% discount from the regular Probook price of $450. It is expected that 25% 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 $95 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 $870. Required: 1. & 2. Indicate below whether each item is a separate performance obligation and allocate the transaction price of 96,000 Protab Packages to the separate performance obligations in the contract. 3. Prepare a journal entry to record sales of 96,000 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 96,000 Protab Packages to the separate performance obligations in the contract. Item Description Answer is not complete. Protab tablet Limited 6-month warranty Option to purchase a Probook Option to purchase extended warranty Total stand-alone price Performance Obligation? Yes No Yes Yes Percentage SA S S S Stand-Alone Price 83,520,000 0 6,480,000 X 0X 90,000,000 Percentage of Total Stand-Alone Price 92.80% 7.20% 100.00%
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 $890 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 $270, a price that represents a 40% discount from the regular Probook
price of $450. It is expected that 25% 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 $95 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 $870.
Required:
1. & 2. Indicate below whether each item is a separate performance obligation and allocate the transaction price of 96,000 Protab
Packages to the separate performance obligations in the contract.
3. Prepare a journal entry to record sales of 96,000 Protab Packages.
Complete this question by entering your answers in the tabs below.
Req 1 and 2
Req 3
Answer is not complete.
Indicate below whether each item is a separate performance obligation and allocate the transaction price of 96,000 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
Performance
Obligation?
Yes
No
Yes
Yes
Percentage
Stand-Alone Price
83,520,000
0
6,480,000 X
0X
90,000,000
Percentage of
Total Stand-Alone
Price
92.80%
7.20%
100.00%
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