Offers an optional extended coverage plan

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Reference no: EM131289866

Concord Inc. manufactures and sells computers that include an assurance-type warranty for the first 90 days. Concord offers an optional extended coverage plan under which it will repair or replace any defective part for 3 years from the expiration of the assurance-type warranty. Because the optional extended coverage plan is sold separately, Concord determines that the 3 years of extended coverage represents a separate performance obligation. The total transaction price for the sale of a computer and the extended warranty is $3,540 on October 1, 2017, and Concord determines the standalone selling price of each is $3,100 and $440, respectively. Further, Concord estimates, based on historical experience, it will incur $200 in costs to repair defects that arise within the 90-day coverage period for the assurance-type warranty. The cost of the equipment is $1,490. Assume that the $200 in costs to repair defects in the computers occurred on October 25, 2017.

(a) Prepare the journal entry(ies) to record the October transactions related to sale of the computers.

Reference no: EM131289866

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