On May 1, 2018, Meta Computer, Inc., enters into a contract to sell 5,000 units of Comfort Office Keyboard toone of its clients, Bionics, Inc., at a fixed price of $95,000, to be settled by a cash payment on May 1. Deliveryis scheduled for June 1, 2018. As part of the contract, the seller offers a 25% discount coupon to Bionics for anypurchases in the next six months. The seller will continue to offer a 5% discount on all sales during the same timeperiod, which will be available to all customers. Based on experience, Meta Computer estimates a 50% probabilitythat Bionics will redeem the 25% discount voucher, and that the coupon will be applied to $20,000 of purchases.The stand-alone selling price for the Comfort Office Keyboard is $19.60 per unit.Required:1. How many performance obligations are in this contract?2. Prepare the journal entry that Meta would record on May 1, 2018.3. Assume the same facts and circumstances as above, except that Meta gives a 5% discount option to Bionicsinstead of 25%. In this case, what journal entry would Meta record on May 1, 2018?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On May 1, 2018, Meta Computer, Inc., enters into a contract to sell 5,000 units of Comfort Office Keyboard to
one of its clients, Bionics, Inc., at a fixed price of $95,000, to be settled by a cash payment on May 1. Delivery
is scheduled for June 1, 2018. As part of the contract, the seller offers a 25% discount coupon to Bionics for any
purchases in the next six months. The seller will continue to offer a 5% discount on all sales during the same time
period, which will be available to all customers. Based on experience, Meta Computer estimates a 50% probability
that Bionics will redeem the 25% discount voucher, and that the coupon will be applied to $20,000 of purchases.
The stand-alone selling price for the Comfort Office Keyboard is $19.60 per unit.
Required:
1. How many performance obligations are in this contract?
2. Prepare the journal entry that Meta would record on May 1, 2018.
3. Assume the same facts and circumstances as above, except that Meta gives a 5% discount option to Bionics
instead of 25%. In this case, what journal entry would Meta record on May 1, 2018?

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