FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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 $450, a price that represents a 40% discount from the regular Probook price of $750. It is expected that 20% of the discount coupons will be utilized.
A coupon to purchase a one-year extended warranty for $65. Customers can buy the extended warranty for $110 at other times if they do not use the $65 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 $760.
Required:
1. & 2. Indicate 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
Transcribed Image Text:Item Description
Protab tablet
Limited 6-month warranty
Option to purchase a Probook
Option to purchase extended warranty
Total stand-alone price
Item Description
Protab tablet
Limited 6-month warranty
Option to purchase a Probook
Option to purchase extended warranty
Total contract price
Performance
Obligation?
Percentage of
Total Stand-
Alone Price
Stand-Alone Price
X Total Transaction
Price
=
Percentage of Total
Stand-Alone Price
Allocated Contract
Price
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