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.
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.
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.
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