In September 2015, Boeing agreed to terms to sell 300 planes to China in one of the
Question:
In September 2015, Boeing agreed to terms to sell 300 planes to China in one of the largest long-term airline contracts ever signed. With contracts to sell a plane, a company such as Boeing would typically require a deposit of as much as \($100\) million per aircraft prior to the start of construction, which may take as long as nine months to complete. Boeing also would likely receive periodic progress payments from China as certain aircraft construction milestones are met. Typically, ten percent of each airplane’s purchase price is withheld by the buyer until flight testing is complete and title of the aircraft is transferred. The average cost of a commercial aircraft is approximately \($350\)—\($500\) million. Discuss the possible approaches to revenue recognition that Boeing might adopt. Which approach do you prefer? Why?
Step by Step Answer:
Financial Accounting For Executives And MBAs
ISBN: 9781618531988
4th Edition
Authors: Wallace, Simko, Ferris