312 Notes Payable - Lease and Rental Units

312 Notes Payable – Lease and Rental Units

Liabilities

Notes Payable

Synopsis

Account 312 is established to record the amounts paid or payable to financial institutions for Lease and Rental Units 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

Prepaid interest
Payments made

Notes payable on lease and rental units
Expired portion of prepaid interest

Example 1

Record the $22,000 transfer of vehicle into daily rental service. The financial institution is transferring the $22,000 floorplan from the new vehicle floorplan to the lease and rental floorplan.

Journal: General Journal

Entry:		Debit	Credit
Account 277	Lease and Rental Vehicles	$22,000
Account 310	Notes Payable – New Vehicles & Demos	$22,000
Account 231	Inventory – New Cars		$22,000
Account 312	Notes Payable – Lease & Rental Units		$22,000

Example 2

Record a $20,000 lien on a lease and rental unit with the interest of $3,260 considered to be prepaid.

Journal: Cash Receipts

Entry:		Debit	Credit
Account 201	Cash on Hand	$16,740
Account 312A	Notes Payable – Lease & Rental Units – Prepaid Interest	$3,260
Account 312	Notes Payable – Lease & Rental Units		$20,000

Example 3

Record the monthly payment of the above loan in the amount of $556.

Journal: Cash Disbursements

Entry:		Debit	Credit
Account 312	Notes Payable – Lease & Rental Units	$556
Account 202	Cash in Bank		$556

Example 4

Record the monthly amortization of the prepaid interest in the amount of $91.

Journal: Standard Entries Journal

Entry:		Debit	Credit
Account 711	Direct Cost – Interest – Close End Lease	$91
Account 312A	Notes Payable – Lease & Rental Units – Prepaid Interest		$91

Comments

A credit balance represents the amounts owed to financial institutions on notes secured by lease and rental units.

Note:

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.