October 30, 2016 admin

Inventory-Used Cars-Other Franchise

Assets

INVENTORY—USED CARS—OTHER FRANCHISE ASSET ACCOUNT
1330

ACCOUNT EXPLANATION
Other franchised used cars held for resale valued at the lower of cost or estimated wholesale value. Cost includes recondition charges.
TRANSACTIONS
  Jrnl. Dr. Cr.
  Used Car—Other Franchise taken in trade on new car sale NV
    Inventory—Used Car—Other Franchise 1330
    Finance Contracts—New 1020
      Sales—New Cars—Other   3340
       
  Reconditioning work performed on used car I    
    Inventory—Used Cars—Other Franchise   1330  
      Sales—Parts to Service—Internal (at internal rate)     5471
      Sales—Parts to Body Shop—Internal (at internal rate)     5331
      Sales—Service Labor—Internal (at internal rate)     5731
      Sales—Body Shop Labor—Internal (at internal rate)     5841
           
  Costing used car—Other Franchise sold at retail UV    
    Cost of Sales—Used Cars—Other Franchise—Retail   4730  
    Cost of Sales—Used Cars—Reconditioning—Retail   4701  
      Inventory—Used Cars—Other Franchise     1330
           
  Repossessed car (originally sold as a new car) purchased from finance institution CD    
    Inventory—Used Cars (at estimated wholesale value, less estimated reconditioning)   1330  
    Estimated Liability for Repossession Purchase Loss 2600
    or or
    Repossession Purchase Loss—New (excess of purchase price) 6070
    Cash in Bank—General 1001
COMMENTS
  • Used cars should be placed in inventory at estimated wholesale value, less estimated reconditioning required to make the vehicle saleable at the estimated wholesale value. When repossessed units are placed in inventory, the excess of purchase price over estimated wholesale value should be charged to Account 2600, Estimated Liablility for Repossession Purchase Loss. If account 2600 is not used, the excess should be charged to Account 6070, Repossession Purchase Loss—New, or Account 6170, Repossession Purchase Loss—Used, depending on whether the sale that led to the repossession was a new vehicle sale or a used vehilce sale. Further information regarding the handling of repossession purchase losses is contained in Account 2600.
  • If at month end, the amount at which a unit is carried in inventory exceeds its current estimated wholesale value, the excess should be credited to this account and charged to Account 4702, Used Cars—Inventory Adjustments.
  • Subsidiary records should supoort this account. At month end, used cars should be physically inventoried and thier total value reconciled with the balance in this account. An aging schedule of used vehicles on hand should be prepared for management review.
  • Auction fees incurred on purchase of used cars should be charged to this account.
  • An inventory numbering system, providing cross-referencing to the new vehicle source where applicable, should be used. See Office Management for details.
  • Units sold as junkers should be recorded as wholesale sales.