Creative Computing sells a tablet computer called the Protab. The $780 sales price of a Protab...


Creative Computing sells a tablet computer called the Protab. The $780 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 $600, a price that represents a 25% discount from the regular Probook price of $800. 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 $85 at other times if they do not use the $60 coupon. Creative estimates that 45% 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 $760.


1. & 2. Indicate 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.

Item Description Performance Obligation? Stand Alone Price Percentage of Total Stand Alone Price
Protab tablet 0
Limited 6-month warranty $0 0
Option to purchase a Probook 0
Option to purchase extended warranty 0
Total stand alone price $00.00%

Item Description Percentage of Total Stand Alone Price * Total Transaction Price =Allocated Contract Price
Protab tablet
Limited 6-month warranty
Option to purchase a Probook
Option to purchase extended warranty
Total contract price $0

3. Prepare a Journal entry to record sales of 90,000 Protab Packages (ignore any sales of extended warranties).

Journal Entry:

Journal entry is the first step of the accounting cycle. Journal entry refers to a short recording of all financial transactions in chronological order in the accounting books.

Answer and Explanation: 1

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1 & 2.

ItemPerformance obligationStand alone pricePercentage of stand alone price
Protab tabletYes76077.16%
Limited 6 month warrantyNo00%

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Learn more about this topic:

Journal Entries and Trial Balance in Accounting


Chapter 3 / Lesson 10

Discover the meaning of a journal entry and a trial balance, types of journal entries, how a general ledger differs from a trial balance, and some examples.

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