October 30, 2016 admin

Rental Vehicles

Assets

RENTAL VEHICLES ASSET ACCOUNT
1650

ACCOUNT EXPLANATION
Cost of new vehicles in rental service within the dealership operation, including dealer-installed options and accessories. Includes vehicles furnished to dealers under the Rent-A-Car program of the Ford Motor Company. Includes those Rent-A-Car units used in the Service Loaner Program. Also includes incentives received for placing vehicles in daily Rent-A-Car service for amounts collected under a used vehicle Guarantee Program: generally units must remain in rental service for at least four months to be eligible for incentives and from 12 to 15 months to qualify for guarantee payments.
TRANSACTIONS
  Jrnl. Dr. Cr.
  New car placed in rental service VP
    Rental Vehicles 1650
      Inventory—New Cars 1300
             
  Rental vehicle removed from rental service, transferred to used car inventory at a gain (represented by the excess of wholesale value, less estimated reconditioning, over net book value) G
    Inventory—Used Cars (at wholesale value less estimated reconditioning) 1350
    Accumulated Depreciation—Rental Vehicles 1660
      Rental Vehicle Net Income 5200
      Rental Vehicles 1650
           
  Record receipt for incentive payments made by check on units placed in daily Rent-A Car service CR  
    Cash in Bank—General   1001
      Rental Vehicles     1650
           
  For incentives credited to the daily rental billing P  
    Accounts Payable   2100
      Rental Vehicles     1650
COMMENTS
  • Vehicles placed in rental service within the dealership operation should be transferred at inventory value, excluding holdback and prep and conditioning, and not recorded as vehicle sales. New vehicles sold to a separate rental organization, independent or owned, should be reported as fleet sales. Units retired from rental service should be transferred to the used car department for disposal and such transfers should be made at estimated wholesale value (less estimated reconditioning charges) with any difference from net book value being recorded in Account 5200, Rental Vehicle Net Income. Subsequent sales of retired units should be recorded as used car sales.
  • Accurate revenue and expense records should be maintained on each rental vehicle so that existing contracts can be evaluated and employeed in establishing future rentals.
  • Account 5200, Rental Vehicle Net Income, is a control account to which rental vehicle income and expenses are charged.
  • Tax counsel should be obtained regarding the handling of leased vehicle income and expense for income tax purposes.