231 New Cars
Assets
Inventories
Synopsis
Account 231 is established to record the inventory value of New Cars on hand.
Debits |
Credits |
|
|
Example 1
Record the factory invoice of $17,043 for the purchase of a new car from the manufacturer. The new car inventory value is $16,168, the Holdback is $525, Co-op Advertising is $175 and New Vehicle Advertising expense is $175.
Journal: New Vehicle Purchase
Entry: |
|
Debit |
Credit |
Account 231 |
Inventory – New Cars |
$16,168 |
|
Account 261 |
Factory Receivables – Holdback |
$525 |
|
Account 261 |
Factory Receivables – Co-op Advertising |
$175 |
|
Account 065-01 |
Advertising Expense – New Vehicles Department |
$175 |
|
Account 310 |
Notes Payable – New Vehicle & Demos |
|
$17,043 |
Example 2
Record the $17,043 purchase of a new car from another dealer. The new car inventory value of $16,168, $525 Holdback, $175 LAM dealer contribution and the $175 LAM group contribution are to be recorded as debits to account 905.
Journal: Cash Disbursement (or New Vehicle Purchase Journal)
Entry: |
|
Debit |
Credit |
Account 231 |
Inventory – New Cars |
$16,168 |
|
Account 905 |
Other Income (Holdback) |
$525 |
|
Account 905 |
Other Income (LAM Dealer Contribution) |
$175 |
|
Account 905 |
Other Income (LAM Group Contribution) |
$175 |
|
Account 202 |
Cash in Bank |
|
$17,043 |
Example 3
Record a Dealer Exchange (DX) of $17,043 new car sale to another dealer. The $525 Holdback, $175 LAM dealer contribution and the $175 LAM group contribution are to be recorded as credits to account 905.
Journal: Dealer Exchange
Entry: |
|
Debit |
Credit |
Account 220A |
Accounts Receivables – Customers- Vehicles |
$17,043 |
|
Account 231 |
Inventory – New Cars |
|
$16,168 |
Account 905 |
Other Income (Holdback) |
|
$525 |
Account 905 |
Other Income (LAM Dealer Contribution) |
|
$175 |
Account 905 |
Other Income (LAM Group Contribution) |
|
$175 |
Example 4
Record the $335 sale and installation of CD changer in a new vehicle. The CD changer sale is $250 and the internal labor sale is $85. The internal labor cost is $25 and the CD changer cost is $175.
Journal: Internal Sales
Entry: |
|
Debit |
Credit |
Account 231 |
Inventory – New Cars |
$335 |
|
Account 663 |
Cost of Sales – Internal Labor Mechanical |
$25 |
|
Account 684 |
Cost of Sales – Accessories |
$175 |
|
Account 242 |
Inventory – Parts & Accessories |
|
$175 |
Account 247A |
Inventory – Work in Process – Mechanical |
|
$25 |
Account 463 |
Sales – Internal Labor Mechanical |
|
$85 |
Account 484 |
Sales – Accessories |
|
$250 |
Comments
A debit balance represents the cost of New Cars in inventory.
Note:
A record of each unit in the vehicle inventories shown below should be made on a Vehicle Inventory Record at the time the unit is acquired.
Stock numbers should be assigned in numerical sequence to new, used and repossessed units acquired. A used unit accepted in trade on the sale of a new unit should be given the same stock number as the new unit sold, but followed by the letter A. A used unit accepted in trade on the sale of another used unit should be given the same stock number as the used unit sold, but followed by the letter B, etc.
Supporting month-end schedules should be prepared. These schedules should be in agreement with the general ledger accounts and compared to physical inventories of the following:
· Demonstrators
· New Cars
· New Trucks
· Other Automotive
Supporting month-end schedules should be prepared. These schedules should be in agreement with the general ledger accounts and compared to physical inventories of the following:
· Used Cars
· Used Trucks
LAST-IN, FIRST-OUT (LIFO) INVENTORY VALUATION
Dealers who have elected to utilize the LIFO method of reporting inventory values should establish separate general ledger accounts captioned LIFO Reserve for each inventory account affected by LIFO.
For example, the entries to establish the initial LIFO adjustment for new vehicles should be handled as follows:
|
New Cars |
|
New Trucks |
Actual inventory |
$425,000 |
|
$175,000 |
LIFO inventory |
$370,000 |
|
$140,000 |
LIFO adjustment |
$55,000 |
|
$35,000 |
|
|
|
|
|
DEBIT |
|
CREDIT |
ENTRY: Acct. 952 LIFO Adjustment |
$90,000 |
|
|
Acct. 231L, Inventory-New Cars-LIFO Reserve |
|
|
$55,000 |
Acct. 237L, Inventory-New Trucks-LIFO Reserve |
|
|
$35,000 |
Subsequent adjustments to each LIFO reserve account should be offset to Account 952, LIFO Adjustment. LIFO adjustments must be recorded and displayed on Page 7, on the operating report.
The Total LIFO Reserve, Line 36, Page 7, will be transferred & displayed on Page 1, Line 35.