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

  1. The Reconditioning cost of Other, non-GM Certified, Used Cars sold to retail customers

 

 

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.