Reference no: EM131346205
Creative Computing sells a tablet computer called the Protab. The $970 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 $250, a price that represents a 40% discount from the regular Probook price of $625. 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 $60 at other times as well. Creative estimates that 30% 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 $950.
Customers must pay $95 to purchase the extended warranty if they don’t purchase it with the $60 coupon that was included in the Protab Package. Creative estimates that 30% of customers will use the $60 coupon to purchase an extended warranty.
Required:
1. & 2. Indicated below whether each item is a separate performance obligation and allocate the transaction price of 80,000 Protab Packages to the separate performance obligations in the contract.
3. Prepare a journal entry to record sales of 80,000 Protab Packages (ignore any sales of extended warranties). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
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