Question

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 $525, a price that represents a 30% discount from the regular Probook price of $750. It is expected that 20% of the discount coupons will be utilized. A coupon to purchase a one-year extended warranty for $40. Customers can buy the extended warranty for $80 at other times if they do not use the $40 coupon. 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 $855. Required: 1. & 2. Indicate below whether each item is a separate performance obligation and allocate the transaction price of 100,000 Protab Packages to the separate performance obligations in the contract. 3. Prepare a journal entry to record sales of 100,000 Protab Packages.

Answer 1

Answer:

the journal entry to record the sale of 100,000 Protab packages:

Dr Cash 88,000,000

   Cr Sales revenue 82,500,000

    Cr Deferred revenue - discount option 4,338,000

    Cr Deferred revenue - extended warranty 1,162,000

Explanation:

some information was missing, so I looked for similar questions:

Each Protab package costs $880

stand alone selling price of a Protab is $855

stand alone price of Probook coupon = ($750 x 30%) x 20% = $45

stand alone price of extended warranty coupon = ($80 - $40) x 30% = $12

item                        stand alone prices  % of package price    allocation of

                                                                                                    transaction $

Protab                          $855                           93.75%                $825.00

Probook coupon           $45                             4.93%                   $43.38

Ext. warranty coup.       $12                               1.32%                     $11.62

total                              $912                              100%                  $880.00