Question

Creative Computing sells a tablet computer called the Protab. The $620 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 $125, a price that represents a 50% discount from the regular Probook price of $250. It is expected that 20% of the discount coupons will be utilized. • A coupon to purchase a one-year extended warranty for $40. Customers can buy the extended warranty for $40 at other times as well. 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 $600. All Protab sales are made in cash. Required: 1. & 2. Indicated below whether each item is a separate performance obligation and allocate the transaction price of 120,000 Protab Packages to the separate performance obligations in the contract. 3. Prepare a journal entry to record sales of 120,000 Protab Packages (ignore any sales of extended warranties). Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 and 2 Reg 3 Indicated below whether each item is a separate performance obligation and allocate the transaction price of 120,000 Protab Packages to the separate performance obligations in the contract. < Prev 11 of 11 Next >

Answer 1

Answert 122) Item Description performance/ standalone 11.4 Total stand 'obligation Price dne 1.4 alone price protab computers T че 3 $72,000,000 96% 120,000x$600] Limited Gmonths warranty NO option to purchase probook yes $3,000,000 4% 120,000x$125) option to purchase extended NO $0 - warranty 하 $ 75,000,000 100% 4% option to purchase Carranty Pron to purchase emlauded Item Description % of Total stand, Total Transach Allocated = contract price alone price for C62071 protab computers 96% $74,400,000 $71,424,000 Limited & Months warranty *$7440900015 Option to purchase probook x $74,400,000 $2,976,000 $ 74,400 000 Total 1007 $74,400,000 3) Journal entry bater p articulars TIF pebit Tcredit Cash ale $74,400,000 To sales Revenue $71,424,000 To Deferred revenue - #2,976,000 Discount coupon DY