For each case, please attempt to answer each question with best effort possible. The cases do not aim to seek the correct answer but rather your approach and thought process towards tackling each question. Please outline any approach you have step by step with details as needed. Grading will not be focused on “correct answers” but evidence of applying insights as well as applying has been included in the supporting readings and videos.
There will be detailed video review sessions available on the case post your submission. The review sessions provided after each case are key to the learning approach. Here a detailed overview of the case and various approaches will be outlined step by step so you get a chance to revise concepts. This post case series of videos will allow you to revisit your submission and build on your learnings. This is a key part of the process of getting each participant to dive into a real-world situation, try their best and with a post case review session, revise the case so learnings can be better entrenched. Good luck and remember the goal is not the correct answer but to highlight your thinking through the process and show the steps involved.
Materials
HBP Coursepack:
Reading: Assets (pp. 5-22) 
Reading: HBP Accounting for Current Assets  
Case: Accounting for Assets at Tesla

Please complete the following assignment questions below versus those in the case:

How is Tesla different from a traditional motor manufacturer not just in terms of product but sales process to customers, manufacturing process, improvements in model or any other area you observe? What do you think if any are the strengths/weaknesses of Tesla as a business?
Inventory: Examine the data on days inventory for Tesla for 2018 and 2019 in the spreadsheet/worksheet available for download. (Calculations have been completed for you for ease of reference).

a. What information can you learn from days inventory? Does it make sense to separate out service parts from other types of inventory? Why?
b. Looking at the data and spreadsheet, how well do you think Tesla is managing its inventory? What trends and patterns stand out to you if any?

c. We can see from the decomposition that raw materials, WIP and service parts increased for the year, whereas finished goods decreased. What questions if any does this raise for you?
d. What critical assumptions has TESLA made to value inventory? Does TESLA use FIFO or LIFO? Explain what is LCM (the lower of cost or market) and how this may impact inventory every year.
e. What in general can be the potential impact on (a) value of inventory on hand with both methods (FIFO and LIFO) in a rising inflation environment) (b) potential impact on the IS?

3. Fixed assets are reported in the balance sheet as: Cost less accumulated depreciation. What information/components do we need to compute depreciation? Which of these components depend on management judgement?
4. Let’s take a look at depreciation expense for Tesla’s Machinery, equipment, vehicles, and office furniture in 2019. Below is an approach outlined:

Depreciation expense for 2019 = ((6,329+7,167)/2)/7   = 6,748/7   = 964
Study this to understand the components and explore the exhibits and case to find the sources of input.
Assumptions:
The average life of this asset is 7 years (given the range of 2 to 12)
The outlays of $838 (7167-6329) for new Machinery, equipment, vehicles, and office furniture were made halfway through the year.
We are assuming that there is zero salvage value. If most of the assets are for specialized machinery and equipment, it is unlikely to have much value at the end of its useful life.
A. How will the depreciation expense for 2019 of 964 above be reported: Is depreciation debited or credited by this? Is accumulated depreciation debited or credited by this? Complete this journal entry. Explain what a contra-asset is? Provide at least 2 examples of contra-assets.
B. It seems straight line depreciation was used above to calculate the depreciation expense- many businesses choose this method. What other methods can be used? Make a case as a management leader for another method of depreciation other than straight line and use your knowledge of various approaches to build a best possible case for another method to be used?
5. What are intangible assets? Provide some examples? Why do you think Tesla has so few intangible assets?
For the exclusive use of J. Brooks, 2024.
9-121-009
REV: NOVEMBER 9, 2020
PAUL M. HEALY
MARSHAL HERRMANN
Accounting for Assets at Tesla
In early March 2020, Alessandra Morales, an experienced analyst at a large U.S. brokerage firm was
asked to provide an overview on accounting for assets for the incoming cohort of new hires in the
firm’s research department, most of whom had only limited financial background. As the basis for her
session, Morales decided to focus on the assets for Tesla, Inc., the U.S. designer, manufacturer and
retailer of electric vehicles, and energy generation and storage systems.
Tesla was founded in 2003 by two engineers looking to prove the superiority of electric cars over
gasoline vehicles. Elon Musk, the engineer and entrepreneur, became an early investor and chairman
of the board. Musk played an active role in the development of the company’s first car, the Roadster,
and subsequently became Tesla’s CEO. Launched in 2008, the Roadster, a luxury sportscar, used the
company’s innovative battery technology and electric powertrain. Tesla later introduced a variety of
additional models, including the Model S (a luxury five-door electric sedan), Model X (a mid-sized
luxury SUV), and Model 3 (a more affordable four-door sedan). The company’s vehicles were produced
at its factories in Fremont (California) and Shanghai, with plans under way for adding additional
factories in Reno (Nevada) and Berlin.
Tss of inventory. In a typical manufacturing firm, the flow is like that depicted in Exhibit 3. Exhibit 4
is a numerical illustration of the way in which costs might be assumed to flow throu