Hans Cars & Trucks sells various types of used vehicles with a one-year warranty that covers any defects. When customers make a purchase, they also receive a coupon for 10 free engine oil changes and an option to change all of the tires for $50 after 30,000 miles. Typically, customers pay $25 for an oil change and $250 for a new set of tires.
Required:
(a) Given the information above, how many performance obligations exist in the contract to purchase a vehicle?
(b) Assume the same contract but that it offers customers an option to change all of the tires for $250 after 30,000 miles. How many performance obligations exist in the contract to purchase a vehicle?

Question

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The Answer of Hans Cars & Trucks sells various types of used vehicles with a one-year warranty that covers any defects. When customers make a purchase, they also receive a coupon for 10 free engine oil changes and an option to change all of the tires for $50 after 30,000 miles. Typically, customers pay $25 for an oil change and $250 for a new set of tires.
Required:
(a) Given the information above, how many performance obligations exist in the contract to purchase a vehicle?
(b) Assume the same contract but that it offers customers an option to change all of the tires for $250 after 30,000 miles. How many performance obligations exist in the contract to purchase a vehicle?

Hans Cars & Trucks Sells Various Types of Used Vehicles