Question

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?

Answer 1

Solution and Explanation:

• The Significant dangers and awards of responsibility for products have been moved to the purchaser.  

• The dealer holds neither proceeding with the administrative contribution to the degree generally connected with the possession nor powerful authority over the products sold.  

• The measure of the income can be dependably estimated.  

• It is plausible that the monetary advantages related to the exchange will stream to the vender.  

• The cost brought about or to be acquired in regard to the exchange can be estimated dependably. In such conditions, any thought previously got for the offer of merchandise is perceived as an obligation. So therefore, receipt of $1000 received by Tesla as a reservation payment from a customer is recorded as short term liability in its books.

Entry shall be as follows:-

Bank/Cash A/c Dr. $1000

To Advances from Customers $1000