Problem 6-2 (Algo) Performance obligations; warranties; option [LO6-2, 6-4, 6-5] Creative Computing sells a tablet computer called the Protab. The $890 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 $145, a price that represents a 50% discount from the regular Probook price of $290. It is expected that 25% 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 $65 at other times as well. Creative estimates that 35% 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 $870. All Protab sales are made in cash. Required: 1. & 2. Indicated 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 (ignore any sales of extended warranties). Complete this question by entering your answers in the tabs below. Req 1 and 2 Reg 3 Indicated 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. Item Description Protab computers Limited 6-month warranty Option to purchase a Probook Option to purchase extended warranty Total stand alone price Item Description Protab computers 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 < Req 1 and 2 Stand Alone Price Total Transaction Price Req 3 > Percentage of Total Stand Alone Price Allocated Contract Price

Problem 6-2 (Algo) Performance obligations; warranties; option [LO6-2, 6-4, 6-5] Creative Computing sells a tablet computer called the Protab. The $890 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 $145, a price that represents a 50% discount from the regular Probook price of $290. It is expected that 25% 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 $65 at other times as well. Creative estimates that 35% 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 $870. All Protab sales are made in cash. Required: 1. & 2. Indicated 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 (ignore any sales of extended warranties). Complete this question by entering your answers in the tabs below. Req 1 and 2 Reg 3 Indicated 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. Item Description Protab computers Limited 6-month warranty Option to purchase a Probook Option to purchase extended warranty Total stand alone price Item Description Protab computers 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 < Req 1 and 2 Stand Alone Price Total Transaction Price Req 3 > Percentage of Total Stand Alone Price Allocated Contract Price

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money

Section: Chapter Questions

Problem 9.4AP

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