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 journal entry to record sales of 100,000 Protab Packages.

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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 $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 journal entry to record sales of 100,000 Protab Packages.

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