Creative Computing sells a tablet computer called the Protab. The $920 sales pri

Question

Creative Computing sells a tablet computer called the Protab. The $920 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 $400, a price that represents a 50% discount from the regular Probook price of $800. It is expected that 25% 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 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 $900. Required: 1. & 2. Indicated 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. Protab Computers Stand Alone Price ? Limited 6 month warranty Stand Alone Price ? Probook Discount Vouchers Stand Alone Price ? Option to purchase a Probook Stand Alone Price?

Explanation / Answer

From the information given above, we have the below activities:

Protab ; 6m Warranty ; Extended warranty ; Probook coupon

Amoung the above listed only 'Protab and 6m Warranty' are one single obligation. Rest are all seperate performance obligation

Units                  90,000 Per unit Protab Computers Stand Alone price          900          81,000,000 Accrued 6 months Warranty expense            20            1,800,000 Extended Warranty 35%            60            1,890,000 Probook Discount Coupon 25%          400            9,000,000 Probook Standalone price          800

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