Problem 6-2 (Algo) Performance obligations; warranties; option [LO6-2, 6-4, 6-5] Creative Computing sells a tablet computer called the Protab. The $780 sales price of a Protab Package includes the following: . One Protab computer. • A six-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 $160, a price that represents a 50% discount from the regular Probook price of $320. It is expected that 25% of the discount coupons will be utilized. • A coupon to purchase a one-year extended warranty for $50. Customers can buy the extended warranty for $50 at other times as well. Creative estimates that 40% 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 $760. 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 95,000 Protab Packages to the separate performance obligations in the contract. 3. Prepare a journal entry to record sales of 95,000 Protab Packages (ignore any sales of extended warranties).
Problem 6-2 (Algo) Performance obligations; warranties; option [LO6-2, 6-4, 6-5] Creative Computing sells a tablet computer called the Protab. The $780 sales price of a Protab Package includes the following: . One Protab computer. • A six-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 $160, a price that represents a 50% discount from the regular Probook price of $320. It is expected that 25% of the discount coupons will be utilized. • A coupon to purchase a one-year extended warranty for $50. Customers can buy the extended warranty for $50 at other times as well. Creative estimates that 40% 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 $760. 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 95,000 Protab Packages to the separate performance obligations in the contract. 3. Prepare a journal entry to record sales of 95,000 Protab Packages (ignore any sales of extended warranties).
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter8: Current And Contingent Liabilities
Section: Chapter Questions
Problem 57BE
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![Problem 6-2 (Algo) Performance obligations; warranties; option [LO6-2, 6-4, 6-5]
Creative Computing sells a tablet computer called the Protab. The $780 sales price of a Protab Package includes the following:
One Protab computer.
• A six-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 $160, a price that represents a 50% discount from the regular Probook
price of $320. It is expected that 25% of the discount coupons will be utilized.
• A coupon to purchase a one-year extended warranty for $50. Customers can buy the extended warranty for $50 at other times as
well. Creative estimates that 40% 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 $760.
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 95,000 Protab
Packages to the separate performance obligations in the contract.
3. Prepare a journal entry to record sales of 95,000 Protab Packages (ignore any sales of extended warranties).](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd985a829-0788-4997-8ef8-1e5d63a0a18d%2Fcf33fe2f-5c69-4549-82da-f88a1015ff9c%2Fcd0l2k6_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 6-2 (Algo) Performance obligations; warranties; option [LO6-2, 6-4, 6-5]
Creative Computing sells a tablet computer called the Protab. The $780 sales price of a Protab Package includes the following:
One Protab computer.
• A six-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 $160, a price that represents a 50% discount from the regular Probook
price of $320. It is expected that 25% of the discount coupons will be utilized.
• A coupon to purchase a one-year extended warranty for $50. Customers can buy the extended warranty for $50 at other times as
well. Creative estimates that 40% 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 $760.
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 95,000 Protab
Packages to the separate performance obligations in the contract.
3. Prepare a journal entry to record sales of 95,000 Protab Packages (ignore any sales of extended warranties).
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Req 1 and 2
Indicated below whether each item is a separate performance obligation and allocate the transaction price of 95,000 Protab
Packages to the separate performance obligations in the contract.
Req 3
Protab computers
Limited six-month warranty
Item Description
Option to purchase a Probook
Option to purchase extended warranty
Total stand alone price
Req 1 and 2
Protab computers
Limited six-month warranty
Option to purchase a Probook
Option to purchase extended warranty
Total contract price
Item Description
Show Transcribed Text
1
Req 3
View transaction list
Journal entry worksheet
Transaction
1
Note: Enter debits before credits.
Performance
Obligation?
Percentage of
Total Stand-
Alone Price
Record the sales of 95,000 Protab Packages.
Record entry
< Req 1 and 2
General Journal
Clear entry
Stand-Alone Price
$
Total Transaction
Price
Prepare a journal entry to record sales of 95,000 Protab Packages (ignore any sales of extended warranties).
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Req 3 >
Debit
0
Percentage of Total
Stand-Alone Price
Credit
Allocated Contract
$
Price
View general journal
0
0
0
0
0%
>
0
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