237 New Trucks

Assets

Inventories

Synopsis

Account 237 is established to record the inventory value of New Trucks and Motor Homes on hand.

Debits

Credits

  1. The Factory invoice amount, less holdback and other non-related items such as supplemental advertising funds, of new trucks and motor homes 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 sale as new trucks and motor homes

 

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

  2. The Cost of new trucks and motor homes placed in demonstration and other temporary company service

  3. The amount of subsequent factory price reductions

  4. The Cost of new trucks and motor homes transferred to other dealers

  5. The Cost of new trucks and motor homes sold and otherwise disposed of

 

Example 1

Record the purchase of a truck from the manufacturer in the amount of $42,250. The inventory value of the truck is $40,150, with Holdback of $1400, Co-op Advertising of $467 and New Cars Advertising expense of $233.

Journal: New Truck Purchases

Entry:

 

Debit

Credit

Account 237

Inventory – New Trucks

$40,150

 

Account 261

Factory Receivables – Holdback

$1,400

 

Account 261

Factory Receivables – Co-op Advertising

$467

 

Account 065-01

Advertising Expense – New Cars

$233

 

Account 310

Notes Payable – New Vehicle & Demos

 

$42,250

Example 2

Record a new truck sale for the amount of $41,551 with a finance contract reserve of $1,297, sales tax of $2,078 and Registration Fees of $180. The inventory value of the truck is $40,151.

Journal: New Truck Sales

Entry:

 

Debit

Credit

Account 205

Contracts in Transit

$43,809

 

Account 262

Due from Finance Companies

$1,297

 

Account 623-638

Cost of Sales – New Trucks – Retail

$40,151

 

Account 423-438

Sales – New Trucks – Retail

 

$41,551

Account 237

Inventory – New Trucks

 

$40,151

Account 324A

Sales Taxes Payable – Excise Taxes

 

$2,078

Account 806

Finance Income – New

 

$1,297

Account 910

Document Handling Fees

 

$180

Comments

A debit balance represents the cost of new trucks and motor homes 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.

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.

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.