647B Reconditioning – Other Used Cars
Cost of Sales
Used Vehicle Department
Cost of Sales Synopsis
Account 647B, Reconditioning – Other Used Cars is established to record the cost of Reconditioning of non-GM Certified Used Cars.
Debits |
Credits |
|
|
Example 1
Record an Other Used Car sale in the amount of $17,076 paid partly with a $14,055 finance contract and $4,000 from the trade-in. The finance contract reserve is $853, sales tax is $854 and Registration Fees are $125. The inventory value of the used vehicle sold is $15,876 of which $876 is due to Reconditioning.
Journal: Used Car Sales
Entry: |
|
Debit |
Credit |
Account 205 |
Contracts in Transit |
$14,055 |
|
Account 262 |
Due from Finance Companies |
$853 |
|
Account 646B |
Cost of Sales – Used Cars Retail – Other |
$15,000 |
|
Account 647B |
Reconditioning – Used Cars Other |
$876 |
|
Account 240 |
Inventory – Used Cars |
$4,000 |
|
Account 446B |
Sales – Used Cars Retail – Other |
|
$17,076 |
Account 240 |
Inventory – Used Cars |
|
$15,876 |
Account 324A |
Sales Taxes Payable – Excise Taxes |
|
$854 |
Account 808 |
Finance Income – Used |
|
$853 |
Account 910 |
Document Handling Fees |
|
$125 |
Comments
The Used Car manager is responsible for appraising Used Cars at the time of acquisition. The appraisal should include an estimate of necessary Reconditioning work in order to prepare the vehicle for sale. The Used Car manager should prepare the Internal Repair order to have the Reconditioning performed. The cost of Reconditioning should be charged to the vehicle by debiting Account 240, Used Cars (Inventory). When the vehicle is sold at retail to an end user, the Reconditioning cost is debited to this account.
Note:
The amount of Reconditioning done on Used Cars is an important statistic, which serves as feedback to inform management about the accuracy of the appraisal, the decision to sell the Car as a retail unit and the effectiveness of the Mechanical Department to perform the work. A comparison between the amount of Reconditioning and the Gross Profit is an indication of the return on the unit sold.