How will the reservation, purchase agreement, and the delivery of a Model 3 impact Tesla's financial statements? Since 2016, Tesla has been accepting reservations for its Model 3 car, which is a mid-size all- electric four-door sedan. The long-range battery Model 3 (310 miles on a single charge) starts at $50,000 while the standard range battery Model 3 (220 miles) starts at $35,000. Production cannot keep up with demand for this model. Tesla produced and delivered 1,772 units during 2017. Tesla has said it plans to produce 5,000 units per week in the latter half of 2018. Currently there are more than 400,000 reservations for the Model 3, with 1,800 reservations being added per day. If a customer wants to purchase a Tesla Model 3, the customer will first make a reservation for a Model 3 which puts the customer in line. A reservation requires a $1,000 reservation payment. When the production of that customer's Tesla would be scheduled within the next 1-3 months, Tesla invites the customer to place an actual order. The $1,000 reservation payment is applied to the customer's purchase agreement. If the customer changes their mind at any point before making the purchase agreement, the $1,000 reservation payment is refundable to the customer. Full payment for the Model 3 (less the $1,000 reservation payment) is collected at the time of delivery to the customer. Questions 1. When Tesla receives a $1,000 reservation payment from a customer, what Tesla general ledger accounts does this $1,000 impact? Explain. 2. Now assume that a customer orders a Model 3 by completing the purchase agreement. Will this purchase agreement directly impact Tesla's balance sheet or income statement at the date of the purchase agreement? 3. When the Model 3 is delivered to the customer and payment is received, how will Tesla's balance sheet and income statement be impacted at the point of delivery?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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When Tesla receives a $1,000 reservation payment from a customer, what Tesla general ledger accounts does this $1,000 impact? Explain.
Now assume that a customer orders a Model 3 by completing the purchase agreement. Will this purchase agreement directly impact Tesla’s balance sheet or income statement at the date of the purchase agreement?
When the Model 3 is delivered to the customer and payment is received, how will Tesla’s balance sheet and income statement be impacted at the point of delivery?

How will the reservation, purchase agreement, and the delivery of a
Model 3 impact Tesla's financial statements?
Since 2016, Tesla has been accepting reservations for its Model 3 car, which is a mid-size all-
electric four-door sedan. The long-range battery Model 3 (310 miles on a single charge) starts
at $50,000 while the standard range battery Model 3 (220 miles) starts at $35,000.
Production cannot keep up with demand for this model. Tesla produced and delivered 1,772
units during 2017. Tesla has said it plans to produce 5,000 units per week in the latter half of
2018. Currently there are more than 400,o00 reservations for the Model 3, with 1,800
reservations being added per day.
If a customer wants to purchase a Tesla Model 3, the customer will first make a reservation
for a Model 3 which puts the customer in line. A reservation requires a $1,000 reservation
payment. When the production of that customer's Tesla would be scheduled within the next
1- 3 months, Tesla invites the customer to place an actual order. The $1,000 reservation
payment is applied to the customer's purchase agreement. If the customer changes their
mind at any point before making the purchase agreement, the $1,000 reservation payment is
refundable to the customer. Full payment for the Model 3 (less the $1,000 reservation
payment) is collected at the time of delivery to the customer.
Questions
1. When Tesla receives a $1,000 reservation payment from a customer, what Tesla general
ledger accounts does this $1,00o impact? Explain.
2. Now assume that a customer orders a Model 3 by completing the purchase agreement. Will
this purchase agreement directly impact Tesla's balance sheet or income statement at the
date of the purchase agreement?
3. When the Model 3 is delivered to the customer and payment is received, how will Tesla's
balance sheet and income statement be impacted at the point of delivery?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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