Response to the following problem:
In the notes to its 2004 annual report, Boeing Co. provided the following information regarding the 717 airplane termination: On January 12, 2005 we decided to conclude production of the 717 commercial airplane... due to the lack of overall market demand for the airplane.
The decision is expected to result in total pre-tax charges of approximately $385, of which $280 is incorporated in the 2004 fourth quarter and year end results. Of the $280 charge..., supplier termination charges were $171; production disruption and related charges were $36; pension/post-retirement curtailment charges were $43; and severance charges were $30. The termination of the 717 line will result in $385 of cash expenditures that are expected to occur during 2005 through 2007.
a. Record the $280 million charge for 2004 using account names suggested by the note.
b. Provide a brief description of the nature of each special charge.
b. Assume the severance charges are paid in cash in 2005. Record the appropriate entry in 2005.
c. Why wasn't the total $385 million expected cash expenditures recorded as a charge in 2004?