In: Accounting
Creative Computing sells a tablet computer called the Protab.
The $605 sales price of a Protab...
Creative Computing sells a tablet computer called the Protab.
The $605 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 $325,
a price that represents a 50% discount from the regular Probook
price of $650. 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 $55 at other times as
well. Creative estimates that 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 $585.
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).