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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
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 $600, a price that represents a 25% discount from the regular Probook price of $800. It is expected that 20% of the discount coupons will be utilized.
- A coupon to purchase a one-year extended warranty for $60. Customers can buy the extended warranty for $85 at other times if they do not use the $60 coupon. Creative estimates that 45% 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 90,000 Protab Packages to the separate performance obligations in the contract. 3. Prepare a journal entry to record sales of 90,000 Protab Packages.
Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req3 Indicate below whether each item is a separate performance obligation and allocate the transaction price of 90,000 Protab Packages to the separate performance obligations in the contract. Performance Percentage of Stand Alone Total Stand Alone Item Descrption Obligation? Price Price Protab tablet Yes 68,400,000 91.41% Limited 6-month warranty No 0 Option to purchase a Probook Yes 4,000,000 X 5.35% Option to purchase extended warranty Yes 2,430,000 3.25% Total stand alone price $ 74,830,000 100.01% $ $ EA Item Descrption Percentage of Total Stand Alone Price 91.41% Total Transaction Price 567,294,000 X = Allocated Contract Price 518,563,445 X $ $ Protab tablet Limited 6-month warranty Option to purchase a Probook Option to purchase extended warranty Total contract price $ 5.35% 3.25% 567,294,000 567,294,000 1111 ASA $ HA $ $ 30,350,229 18,437,055 567,350,729 69Step by Step Solution
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