Creative Computing sells a tablet computer called the Protab. The $780 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 $200, a price that represents a 50% discount from the regular Probook price of $400. It is expected that 20% 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. Required: 1. How many performance obligations are included in a Protab Package? Explain your answer. 2. List the performance obligations in the Protab Package in the following table, and complete it to allocate the transaction price of 100,000 Protab Packages to the performance obligations in the contract. Performance obligation: Stand-alone selling price of the performance obligation: Percentage of the sum of the stand-alone selling prices of the performance obligations (to two decimal places): 3. Prepare a journal entry to record sales of 100,000 Protab Packages (ignore any sales of extended warranties). Allocation of total transaction price to the performance obligation:
Creative Computing sells a tablet computer called the Protab. The $780 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 $200, a price that represents a 50% discount from the regular Probook price of $400. It is expected that 20% 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. Required: 1. How many performance obligations are included in a Protab Package? Explain your answer. 2. List the performance obligations in the Protab Package in the following table, and complete it to allocate the transaction price of 100,000 Protab Packages to the performance obligations in the contract. Performance obligation: Stand-alone selling price of the performance obligation: Percentage of the sum of the stand-alone selling prices of the performance obligations (to two decimal places): 3. Prepare a journal entry to record sales of 100,000 Protab Packages (ignore any sales of extended warranties). Allocation of total transaction price to the performance obligation:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Creative Computing sells a tablet computer called the Protab. The $780 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 $200, a price that represents a 50% discount from the regular Probook price of $400. It
is expected that 20% 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.
Required:
1. How many performance obligations are included in a Protab Package? Explain your answer.
2. List the performance obligations in the Protab Package in the following table, and complete it to allocate the transaction price of 100,000 Protab
Packages to the performance obligations in the contract.
Performance
obligation:
Stand-alone
selling price of the
performance obligation:
Percentage of the sum of the stand-alone
selling prices of the performance obligations
(to two decimal places):
3. Prepare a journal entry to record sales of 100,000 Protab Packages (ignore any sales of extended warranties).
Allocation of total
transaction price to the
performance obligation:
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