is warranty guar
Chapter12: Current Liabilities
Section: Chapter Questions
Problem 9MC: Blake Department Store sells television sets with one-year warranties that cover repair and...
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Creative Computing sells a tablet computer called the Protab. The $740 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 $225, a price that represents a 40% discount from the regular Probook price of $375. It is expected that 20% of the discount coupons will be utilized.
- A coupon to purchase a one-year extended warranty for $70. Customers can buy the extended warranty for $100 at other times if they do not use the $70 coupon. Creative estimates that 40% 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 $720.
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
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