Cool Inc. is a retailer of electronics. In December of 2020, it offered some great deals. For example, a customer can purchase the following in a package deal for an all-in great price of $800:

A Blu-ray Player that normally sells for $550 (inventory cost $275)

A home theater projector that normally sells for $350 (inventory cost $175)

A 5-year extended warranty covering both products that normally sells for $50

Customers who buy this bundle also get a 40% off coupon good for the next 30 days useable on all store merchandise. Based on experience, management expects one third of its customers to exercise the coupon and that the average customer will purchase $500 of additional merchandise with this coupon. The company also announced a 10% discount on all merchandise sales for the next month; customers who use the coupon do not receive that discount in addition to the coupon.

On December 30, 2020, Karen purchases the special package (Blu-ray, projector and extended warranty). Unfortunately, the projector is on back order but Cool promises to deliver it in about 10 business days. Karen pays the full price ($800) at checkout and takes the Blu-ray home. Cool delivers the projector as promised on January 12, 2021. Karen returns on January 20, 2021 and purchases an iPad mini that normally sells for $400 (inventory cost $195), using the 40% off coupon. Assume Karen always pays with cash.

Required: Complete the following.

1. What are the performance obligations under this arrangement?

2. What are Cool's journal entries at December 30, 2020 (Including cost of goods sold entries)?

3. What journal entries, if any, should Cool make on January 12, 2021?

4. What journal entries should Cool make on January 20, 2021 assuming the customer takes possession of the iPad at checkout and does not purchase another extended warranty.

5. How much warranty revenue will Cool recognize per year on this package deal? (no journal entry necessary).