Reference no: EM132804466

Problem - On May 1, Beta Computers, Inc., enters into a contract to sell 4,100 units of Cozy Office Keyboard to one of its clients, Theranos, Inc., at a fixed price of $69,700, to be settled by a cash payment on May 1. Delivery is scheduled for June 1. As part of the contract, the seller offers a 25% discount coupon to Theranos for any purchases in the next six months. The seller will continue to offer a 5% discount on all sales during the same time period, which will be available to all customers. Based on experience, Beta Computer estimates a 50% probability that Theranos will redeem the 25% discount voucher, and that the coupon will be applied to $41,000 of purchases. The stand-alone selling price for the Cozy Office Keyboard is $19.00 per unit.

Required -

1. How many performance obligations are in this contract?

2. Prepare the journal entry that Beta would record on May 1 using the given information. Then, prepare the journal entry assuming the same facts and circumstances as above, except that Beta gives a 5% discount option to Theranos instead of 25%.