Question

annect 1 Creative Computing sells a tablet computer called the Protab. The $920 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 $330, a price that represents a 40% discount from the regular Probook price of $550. It is expected that 25% of the discount coupons will be utilized. • A coupon to purchase a one-year extended warranty for $60. Customers can buy the extended warranty for $90 at other times if they do not use the $60 coupon. 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 $900. Required: 1. & 2. Indicate below whether each item is a separate performance obligation and allocate the transaction price of 90,000 Protab Packages to the separate performance obligations in the contract. 3. Prepare a journal entry to record sales of 90,000 Protab Packages Complete this question by entering your answers in the tabs below. Req 1 and 2 Reg 3 Indicate below whether each item is a separate performance obligation and allocate the transaction price of 90.000 Protab Packages to the separate performance obligations in the contract. Percentage of Total Stand Alone Price Obligation Stand Alone Price Item Descrption Protab tablet Limited 6-month warranty Option to purchase a Probook Option to purchase extended warranty Total stand alone price 100005 425.000 Total Stand Total Transaction - Allocated contract Hem Descrption Protab tablet Limited 6-month warranty Opbon to purchase a Probook Option to purchase extended warranty Next >

Answer 1

1 &2:

Item	Performance obligation	Stand alone price	Percentage of total stand alone price
Protab computers	Yes	81,000,000.00	91.60%
Limited 6 month warranty	No
Option to purchase a probook	Yes	7,425,000.00	8.40%
Option to purchase extended warranty	No
Total stand alone price		88425000	100.00%

* Protab computers stand alone price = 900*90000 = 81,000,000

Option to purchase = 330*90000*25% = 7,425,000

Item	Percentage of total stand alone price		Total transaction price		Allocated contract price
Protab computers	91.60%	X	82,800,000	=	75844800
Limited 6 month warranty
Option to purchase a probook	8.40%	X	82,800,000	=	6955200
Option to purchase extended warranty
Total contract price					82800000

* Total transaction price = 920 * 90,000 = 82,800,000

3.

No	Transaction	General Journal	Debit	Credit
		Cash	82800000
		Sales revenue		75844800
		Deferred revenue - discount option		6955200