Celic Inc. manufactures and sells computers that include an assurance-type warranty for the first 90 days. Celic offers an optional extended coverage plan under which it will repair or replace any defective part for 3 years from the expiration of the assurance-type warranty. Because the optional extended coverage plan is sold separately, Celic determines that the 3 years of extended coverage represent a separate performance obligation. The total transaction price for the sale of a computer and the extended warranty is $11,000 on October 1, 2014, and Celic determines the standalone selling price of each is $9,900and $1,340, respectively. Further, Celic estimates, based on historical experience, it will incur $620 in costs to repair defects that arise within the 90-day coverage period for the assurance-type warranty. The cost of the equipment is $3,474.

DATE

Account Titles and Explanation

Debit

Credit

October 31, 2014

(To record cash sales)

October 31, 2014

(To record the cost of goods sold)

xxxxxxxx

xxxxxxxxx

xxxxx

xxxx

xxxxxxxxxx

xxxxxxxxx

xxxxx

xxxxx

xxxxx

xxxxx

xxxxx

xxxxx

(xxxxxx-means ignored row)