235 Medium Duty Trucks

Assets

Inventories

Synopsis

Account 235 is established to record the inventory value of New Medium Duty Trucks on hand.

Debits

Credits

  1. The factory invoice amount, less holdback and other non-related items such as supplemental advertising funds, of new Medium Duty Trucks acquired

  2. The Internal selling price of dealer-installed accessories and optional equipment and the labor and materials required for installation

  3. The cost of dealer installed Other Automotive items and the Internal selling price of the labor and materials required for installation

  4. The Destination, delivery and handling charges

  5. The Cost of new units transferred from demonstration and other temporary company service for sales as new Medium Duty Trucks

 

  1. The replacement value of accessories, optional equipment and tires removed from new Medium Duty Trucks and placed in Account 242, Parts & Accessories (inventory) and Account 243, Tires (inventory) as applicable

  2. The amount of subsequent factory price reductions

  3. The Cost of new Medium Duty Trucks placed in demonstration and other temporary company service

  4. The Cost of new Medium Duty Trucks transferred to other dealers

  5. The Cost of new Medium Duty Trucks sold and otherwise disposed of

Example 1

Record the factory invoice $26,291 and $680 Holdback for the purchase of a new medium duty truck from the manufacturer.

Journal: New Medium Duty Trucks Purchase

Entry:

 

Debit

Credit

Account 235

Inventory – New Medium Duty Trucks

$26,291

 

Account 261

Factory Receivables – Holdback

$680

 

Account 310

Notes Payable – New Vehicles & Demos

 

$26,971

Example 2

Record the sale of a medium duty truck for the amount of $30,000 with a finance contract reserve of $665, sales tax of $1,500 and Registration Fees of $180. The inventory value is $26,971.

Journal: New Medium Duty Truck Sales

Entry:

 

Debit

Credit

Account 205

Contracts in Transit

$31,680

 

Account 262

Due from Finance Companies

$665

 

Account 638

Cost of Sales – New Trucks – Retail

$26,971

 

Account 438

Sales – New Trucks – Retail

 

$30,000

Account 235

Inventory – New Trucks

 

$26,971

Account 324A

Sales Taxes Payable – Excise Taxes

 

$1,500

Account 806

Finance Income – New

 

$665

Account 910

Document Handling Fees

 

$180

Comments

A debit balance represents the cost of new Medium Duty Trucks 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

Transactions, which are related, should be recorded in separate sub-accounts.  Sub-accounts serve to keep records organized for future analysis and auditing.  The sub-accounts in these examples are designated by a letter following the account number (suffix).  Please refer to your DSP's instructions for establishing sub-accounts.

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.