310 Notes Payable - New Vehicles and Demonstrators

310 Notes Payable – New Vehicles and Demonstrators

Liabilities

Notes Payable

Synopsis

Account 310 is established to record the amounts paid or payable to financial institutions for New Vehicle inventory financed on a short term line of credit. This line of credit is secured by the vehicles themselves and is commonly referred to as the “floorplan”.

Debits

Credits

Payments made
Amount due on vehicles placed in the Driver Training Program and in permanent company service
Amount due on vehicles sold to other departments

Notes payable on new vehicles and demonstrators

Example 1

Record the purchase of a truck from the manufacturer in the amount of $40,150, with $1,400 in Holdback, $467 in Co-op Advertising and $233 Advertising expense.

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 the payoff of the floorplan on the above truck in the amount of $42,250.

Journal: Payoff and Cash Disbursements

Entry:		Debit	Credit
Account 310	Notes Payable – New Vehicle & Demos	$42,250
Account 202	Cash in Bank		$42,250

Comments

A credit balance represents the amounts owed to finance institutions on notes secured by new vehicles and demonstrators in inventory and new vehicles sold for which delayed payments have been authorized.