Question

ttur htureet fer the work you havé completed so far. It does not Indicate completion Return to que Problem 5-3 Performance obligations; warranties; option [LO5-2,5-4,5-5 Creative Computing sells a tablet computer called the Protab. The $970 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 ·A coupon to purchase a Creative Probook e-book reader for S375, a price that represents a 40% discount from the regular Proto A coupon to purchase a one-year extended warranty for $60. Customers can buy the extended warranty for $95 at other times if associated with defective products for up to six months. price of S625. It is expected that 20% of the discount coupons wil be utilized. they do not use the $60 coupon. Creative estimates th t 30% 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 $950 Required: 1. & 2. Indicate below whether each item is a separate performance obligation and allocate the transaction price of 80,000 Protab Packages to the separate performance obligations in the contract 3. Prepare a journal entry to record sales of 80,000 Protab Packages (gnore any sales of extended warranties). Answer is not complete Complete this question by entering your answers in the tabs below Req 1 and 2 Reg 3 < Prox 90f 15 Next > 3 5 W E

Answer 1

Answer 1 & 2.
Item Description	Performance Obligation		Stand Alone Price		% of Total Stand Alone price
Protab Tablet	Yes		76,000,000		94.01%
Limited 6-Month Warranty	No		-		0.00%
Option to Purchase a Probook	Yes		4,000,000		4.95%
Option to Purchase Extended Warranty	Yes		840,000		1.04%
Total Stand Alone Price			80,840,000		100.00%
Item Description	% of Total Stand Alone price	X	Total Transaction Price	=	Allocated Contract Price
Protab Tablet	94.01%	X	77,600,000		72,953,983
Limited 6-Month Warranty	-	X
Option to Purchase a Probook	4.95%	X	77,600,000		3,839,683
Option to Purchase Extended Warranty	1.04%	X	77,600,000		806,333
Total Contract Price	100.00%	X	77,600,000		77,600,000
Stand Alone Price:
Protab Tablet =80,000 Nos X $950 = $76,000,000
Option to Purchase a Probook = 80,000 X $250 X 20% = $4,000,000
Option to Purchase Extended Warranty = 80,000 Nos X $35 x 30% = $1,920,000

Answer 3.
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
1	Cash	77,600,000
	Sales revenue		72,953,983
	Deferred Revenue - Discount Coupon		4,646,017
	(record the sale of 80,000 Protab)