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Problem 6-3 (Algo) Performance obligations; warranties; option (L06-2, 6-4, 6-5) Creative Computing sells a tablet computer called the Protab. The $860 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 $675, a price that represents a 25% discount from the regular Probook price of $900. 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 $80 at other times if they do not use the $50 coupon. 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 $840. Required: 1. & 2. Indicate below whether each item is a separate performance obligation and allocate the transaction price of 96,000 Protab Packages to the separate performance obligations in the contract. 3. Prepare a journal entry to record sales of 96,000 Protab Packages. Answer is not complete. 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 96,000 Protab Packages to the separate performance obligations in the contract. Performance Obligation? Percentage of Total Stand Alone Price 92.49% Yes $ No $ Item Descrption Protab tablet Limited 6-month warranty Option to purchase a Probook Option to purchase extended warranty Total stand alone price Stand Alone Price 80,640,000 0 5,400,000 1,152,000 87,192,000 Yes $ $ $ $ 6.19% 1.32% Yes 100.00% Item Descrption Percentage of Total Stand Alone Price 92.49% Total Transaction Price 82,560.000 Allocated Contract Price x $ $ 76,359.744 x $ $ Protab tablet Limited 6-month warranty - Option to purchase a Probook Option to purchase extended warranty Total contract price 6.19% 1.32% 82,560,000 82,560,000 x $ $ 5,110,464 1,089,792 82,560,000 $ Required: 1. & 2. Indicate below whether each item is a separate performance obligation and allocate the transaction price of 96,000 Protab Packages to the separate performance obligations in the contract. 3. Prepare a journal entry to record sales of 96,000 Protab Packages. Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 and 2 Reg 3 Prepare a journal entry to record sales of 96,000 Protab Packages. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Transaction General Journal Credit Debit 82,560,000 1 1 Cash Sales revenue Deferred revenue - coupons Deferred revenue - extended warranties Required: 1. How many performance obligations are in this contract? 2. Prepare the journal entry that Meta would record on May 1, 2021. 3. Assume the same facts and circumstances as above, except that Meta gives a 5% discount option to Bionics instead of 25%. In this case, what journal entry would Meta record on May 1, 2021? Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare the journal entry that Meta would record on May 1, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Transaction Debit Credit 1 1 General Journal Cash Deferred revenue Deferred revenue - coupons Required: 1. How many performance obligations are in this contract? 2. Prepare the journal entry that Meta would record on May 1, 2021. 3. Assume the same facts and circumstances as above, except that Meta gives a 5% discount option to Bionics instead of 25%. In this case, what journal entry would Meta record on May 1, 2021? Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Assume the same facts and circumstances as above, except that Meta gives a 5% discount option to Bionics instead of 25%. In this case, what journal entry would Meta record on May 1, 2021? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Transaction General Journal Debit Credit 1 Cash Deferred revenue
