242 Parts and Accessories
Assets
Inventories
Synopsis
Account 242 is established to record the inventory value of Parts and Accessories on hand.
Debits |
Credits |
|
|
Example 1
Record the invoice from the manufacturer for a stock-order of $15,320 and purchase allowances of $1,265. The parts inventory value is $16,585.
Journal: Purchase
Entry: |
|
Debit |
Credit |
Account 242 |
Inventory – Parts & Accessories |
$16,585 |
|
Account 300 |
Accounts Payable – Trade Creditors |
|
$15,320 |
Account 687 |
Purchase Allowances |
|
$1,265 |
Example 2
Record $985 appreciation in parts value due to increase in parts pricing from manufacturer.
Journal: General Journal
Entry: |
|
Debit |
Credit |
Account 242 |
Inventory – Parts & Accessories |
$985 |
|
Account 688 |
Adjustments – Parts & Accessories Inventory |
|
$985 |
Example 3
Record the $6,437 adjustment to bring book balance of Parts & Accessories Inventory up to physical inventory balance.
Journal: General Journal
Entry: |
|
Debit |
Credit |
Account 242 |
Inventory – Parts & Accessories |
$6,437 |
|
Account 688 |
Adjustments – Parts & Accessories Inventory |
|
$6,437 |
Comments
A Debit Balance represents the inventory value of automotive parts and accessories.
Note:
Sub-Accounts should be set up for GM Accessories, Parts Cores and Shop Supplies.
If other than new G.M. vehicles are sold by the dealership, a separate General Ledger Account should be established for the inventory of parts and accessories related to the other lines handled. This account should be combined with Account 242, Parts & Accessories when preparing the month-end trial balance.
A physical inventory of parts and accessories should be taken at least once a year. It should be priced at the lower of cost or market value. Any difference between book and physical count values should be adjusted through Account 688, Adjustment – Parts and Accessories Inventory.
Physical inventories should be taken at each month end of the following:
· Tires
· Gas, Oil and Grease
· Paint and Body Shop Materials
These inventories should be priced at the lower of cost or market values. Any differences between book and physical count values should be adjusted through the following accounts, as applicable:
· Acct. 690, Cost of Sales-Tires
· Acct. 691, Cost of Sales-Gas, Oil and Grease
· Acct. 669, Cost of Sales-Shop Supplies
· Acct. 679, Cost of Sales-Paint and Body Shop Materials
A physical inventory of other merchandise should be taken at least once each year. It should be priced at the lower of cost or market value. Any difference between book and physical count values should be adjusted through Acct. 692, Cost of Sales-Miscellaneous.
LAST-IN, FIRST-OUT (LIFO) INVENTORY VALUATION
Dealers who have elected to utilize the LIFO method for reporting other inventories should establish separate general ledger accounts captioned LIFO Reserve for each other inventory account affected by LIFO.
For example, the entries to establish the initial LIFO adjustment should be handled as follows:
|
Parts andAccessories Inventory |
|
OtherInventory |
Actual inventory |
$170,000 |
|
$50,000 |
LIFO inventory |
$135,000 |
|
$42,000 |
LIFO adjustment |
$35,000 |
|
$8,000 |
|
|
|
|
|
DEBIT |
|
CREDIT |
ENTRY: Acct. 952 LIFO Adjustment |
$43,000 |
|
|
Acct. 242L, Inventory-Parts & Accessories-LIFO Reserve |
|
|
$35,000 |
Acct. 252L, Inventory-Other-LIFO Reserve |
|
|
$8,000 |
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.