Fedex Case

In this memo, we will be presenting the journal entries at different stages of a FedEx and Boeing contract. The contract is for the sale of four Boeing 777 aircrafts to FedEx for a total price of $940 million. To finance this transaction, FedEx put a down payment on the aircrafts of $94 million and took out a five-year note payable of $846 million. The note has an 8% interest rate that is equal to the market interest rate. In a modified situation, Boeing offered FedEx a 6% discount rate when the market rate was still 8%. We will show the journal entries for both companies at the signing of the contract, the inception of the note, the first year of the note, and the fifth year of the note for both interest rates.

JOURNAL ENTRIES UPON SIGNING CONTRACT

FedEx put a $94 million down payment on the four aircrafts when they signed the contract. Boeing received this payment but did not deliver the aircrafts. Below are the journal entries for the two companies at this time with an 8% interest rate on the note payable.

|FedEx | | | | |

|Deposit on Aircraft Purchase | $ 94,000,000.00 | |

| |Cash | | | $ 94,000,000.00 |

|Boeing | | | | |

|Cash | | | $ 94,000,000.00 | |

| |Deferred Sales Revenue | | $ 94,000,000.00 |

The journal entries for the note with a 6% interest rate are the same as the entries above.

JOURNAL...