Moto-Lite Company is an original equipment manufacturer of high-quality aircraft engines that it traditionally has sold directly to aero clubs building their own aircraft. The engine's selling price depends on its size and horsepower; Moto-Lite's average gross profit per engine is 35%. To expand its sales, Moto-Lite entered into an agreement with Macco Corporation, a British manufacturer of light aircraft, to be the sole supplier of its 80-horsepower, 2-stroke engines. Under the terms of the agreement, Moto-Lite will stock a minimum of 10 engines at Macco's production facility to service aircraft production requirements. Each engine has a firm selling price of $6,000. Title to the engines does not pass until Macco uses the engine in its production process. During its quarter ending October 31, Moto-Lite shipped and billed 19 engines (DR Accounts receivable, CR Sales) to Macco Corporation. As of that date, Macco had used 9 engines in its production process. All but 3 of the engines used had been paid for prior to October 31 . The remaining 10 engines will be used in November. Required: 1. What type of agreement does this appear to be? Was Moto-Lite correct to record all 19 motors shipped as sales in the quarter ending October 31 ? 2. How should the transaction be accounted for, and by how much, if at all, were Moto-Lite's sales, receivables, and gross profit overstated at October 31