Problem 6-3 (Algo) Performance obligations; warranties; option [LO6-2, 6-4, 6-5] Creative Computing sells a tablet computer called the Protab. The $785 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 $425, a price that represents a 50% discount from the regular Probook price of $850. It is expected that 20% of the discount coupons will be utilized. • A coupon to purchase a one-year extended warranty for $55. Customers can buy the extended warranty for $80 at other times if they do not use the $55 coupon. Creative estimates that 45% 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 $765. 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. 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 100,000 Protab Packages to the separate performance obligations in the contract. Item Descrption Protab tablet Limited 6-month warranty Option to purchase a Probook Option to purchase extended warranty Total stand alone price Item Descrption Protab tablet Limited 6-month warranty Option to purchase a Probook Option to purchase extended warranty Total contract price Performance Obligation? Percentage of Total Stand Alone Price < Req 1 and 2 Stand Alone Price Total Transaction Price Req 3 > Percentage of Total Stand Alone Price Allocated Contract Price
Problem 6-3 (Algo) Performance obligations; warranties; option [LO6-2, 6-4, 6-5] Creative Computing sells a tablet computer called the Protab. The $785 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 $425, a price that represents a 50% discount from the regular Probook price of $850. It is expected that 20% of the discount coupons will be utilized. • A coupon to purchase a one-year extended warranty for $55. Customers can buy the extended warranty for $80 at other times if they do not use the $55 coupon. Creative estimates that 45% 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 $765. 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. 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 100,000 Protab Packages to the separate performance obligations in the contract. Item Descrption Protab tablet Limited 6-month warranty Option to purchase a Probook Option to purchase extended warranty Total stand alone price Item Descrption Protab tablet Limited 6-month warranty Option to purchase a Probook Option to purchase extended warranty Total contract price Performance Obligation? Percentage of Total Stand Alone Price < Req 1 and 2 Stand Alone Price Total Transaction Price Req 3 > Percentage of Total Stand Alone Price Allocated Contract Price
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Problem 6-3 (Algo) Performance obligations; warranties; option [LO6-2, 6-4, 6-5]
Creative Computing sells a tablet computer called the Protab. The $785 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 $425, a price that represents a 50% discount from the regular Probook
price of $850. It is expected that 20% of the discount coupons will be utilized.
• A coupon to purchase a one-year extended warranty for $55. Customers can buy the extended warranty for $80 at other times if
they do not use the $55 coupon. Creative estimates that 45% 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 $765.
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.
Complete this question by entering your answers in the tabs below.
and 2
3
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.
Item Descrption
Protab tablet
Limited 6-month warranty
Option to purchase a Probook
Option to purchase extended warranty
Total stand alone price
Item Descrption
Protab tablet
Limited 6-month warranty
Option to purchase a Probook
Option to purchase extended warranty
Total contract price
Performance
Obligation?
Percentage of
Total Stand
Alone Price
< Req 1 and 2
Stand Alone Price
Total Transaction
Price
Req 3 >
Percentage of Total
Stand Alone Price
Allocated Contract
Price](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcb78f270-b29f-4df2-98c8-b80bb2ba3130%2F67dd9913-ed4f-4777-9f91-ac44b559468d%2F8fk79j_processed.png&w=3840&q=75)
Transcribed Image Text:Problem 6-3 (Algo) Performance obligations; warranties; option [LO6-2, 6-4, 6-5]
Creative Computing sells a tablet computer called the Protab. The $785 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 $425, a price that represents a 50% discount from the regular Probook
price of $850. It is expected that 20% of the discount coupons will be utilized.
• A coupon to purchase a one-year extended warranty for $55. Customers can buy the extended warranty for $80 at other times if
they do not use the $55 coupon. Creative estimates that 45% 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 $765.
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.
Complete this question by entering your answers in the tabs below.
and 2
3
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.
Item Descrption
Protab tablet
Limited 6-month warranty
Option to purchase a Probook
Option to purchase extended warranty
Total stand alone price
Item Descrption
Protab tablet
Limited 6-month warranty
Option to purchase a Probook
Option to purchase extended warranty
Total contract price
Performance
Obligation?
Percentage of
Total Stand
Alone Price
< Req 1 and 2
Stand Alone Price
Total Transaction
Price
Req 3 >
Percentage of Total
Stand Alone Price
Allocated Contract
Price
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