September 19, 2022 
The Ford Motor Company (NYSE: F) is selling an electric version of its F-150 pickup truck, the F-150 Lightning electric truck. Ford cannot keep up with demand; it has taken orders for its entire 2022 production capacity and has closed orders for the 2022 model. Ford has not yet begun taking reservations for the 2023 model. The F-150 Lightning order and sales process consists of the following steps:
- The prospective buyer must first purchase a $100 refundable reservation that earns them the right to order a vehicle at a future unspecified date. The $100 is a deposit on the future purchase.;
- Ford then sends the reservation holder an invitation to place an order.
Ford sells the reservations and takes orders directly online, but the buyer must designate a local dealership to deliver the vehicle. In addition to the $100 refundable reservation fee, assume that the customer must make a $2,000 deposit at the time of order and will pay for the vehicle upon delivery with cash, dealer financing, or a combination of cash and financing.
View a quick tutorial video about revenue recognition at this link and then answer the following questions.
Questions
- Will Ford recognize revenue for the $100 refundable reservation fee on the day that it receives the $100? Explain.
- When Ford receives a $100 reservation payment from a customer, what Ford general ledger accounts does this $100 impact? Explain.
- Will Ford recognize revenue for the $2,000 deposit on the day that the order is placed? Explain.
- Now assume that a customer purchases a reservation for an F-150 Lightning and receives an invitation to order. The customer then places an order and makes the required deposit of $2,000. How will this sales order and deposit directly impact Tesla’s balance sheet and income statement on the date of the order and deposit?
- When the F-150 Lightning is delivered to the customer, assume that full payment for the vehicle is received in cash from the customer. How will Ford’s balance sheet and income statement be impacted at the point of delivery? (Ignore dealership fees for this question.)
Copyright 2022 Wendy M. Tietz, LLC
Accounting in the Headlines 
Great examples! Is there a way to get “suggested answers” to the questions?
Thanks
With the blog posts I have added starting in 2022, I now include a tutorial video with the blog post that goes through a similar example for guidance. Beyond that, I do not provide any instructor materials for Accounting in the Headlines (unless there is a link in the blog post to request the instructor materials for a project.) For short blog posts, I do not prepare solutions for two reasons:
1. Most posts are designed to generate discussion and there may not be one right answer. I would not want to provide “one” right solution – that would discourage conversation.
2. I have no way to control who gets the solutions if I post them – I know some instructors use the blog posts as assignments – so I don’t want to provide answers where they are discoverable.
But the projects – those do have instructor guides – in the blog posts for those, you will find a link to fill out to request the materials. I generally send those out about once a week.
Thanks for the question and have a great day!