241 Used Trucks

Assets

Inventories

Synopsis

Account 241 is established to record the inventory value of Used Trucks on hand.

Example 1

Record the $3,500 trade-in of a used truck on the $18,300 sale of a new car with sales tax of $1,015. The inventory value of the new car is $17,500.

Journal: New Car Sales

Example 2

Record the $3,400 sale of the above used truck to a wholesaler. The inventory value is $3,500.

Journal: Wholesale Sales

Example 3

Record the $200 write-down of a used truck in inventory.

Journal: General Journal

Example 4

Record a $400 internal repair order for reconditioning costs to a used truck that is in inventory. The internal labor sale is $300 and internal parts sale is $100. The cost of the internal labor sale is $90 and cost of the internal parts sale is $80.

Journal: Internal Sales

Comments

A debit balance represents the inventory value of used trucks and motor homes intended for resale.

Note:

The inventory value of each used vehicle should be the lower of cost or appraised wholesale value.

The cost of a used vehicle is:

·        Trade-in allowance

OR

·        Purchase price

PLUS

·        Internal selling price of mechanical and body reconditioning, including accessories, optional equipment and body and truck equipment plus the internal selling price of the labor and materials required for installation.

·        Traveling expenditures when acquiring vehicles.

·        Auction fees on vehicles purchased.

At each month end, used vehicles should be adjusted to appraised wholesale values through Account 649, Adjustment – Used Car Inventory, and Account 653, Adjustment – Used Truck Inventory, as applicable.

A record of the cost of reconditioning a used vehicle and the amount of the monthly writedown, if necessary, should be made on the applicable Vehicle Inventory Record.

Used vehicles purchased at GM auctions and from GM divisions should be identified.  This can be accomplished by the use of a prefix to the stock number such as PGM 236.  The P meaning a purchased unit and GM meaning GM auction or divisions.

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:

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.