| SECTION 2 |
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RENT AND RENT EQUIVALENT
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Account 8300, Rent & Lease Expense
Account 8320, Interest—Mortgage
Account 8340, Depreciation—Building & Improvements
Account 8360, Amortization of Leasehold Improvements
Account 8380, Insurance—Buildings
Account 8400, Taxes—Real Estate
Account 8420, Maintenance—Buildings
First distribute each item of these expenses that can be identified with a specific operating department to that department. Then allocate all remaining items on the basis of percentages computed using the relative value of the land and building area occupied by each operating department and the general office. The relative value varies with the estimated cost as determined by the location of the area occupied by each activity.
In the following example, rent is first apportioned 55% to buildings and 45% to land, a typical basis for such allocation. The relative value factors used are also considered more or less typical, depending on the location of the various activities in the average dealership.
| Example: |
Annual Rent Expense |
$30,000 |
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55/45 Apportionment |
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Building |
$16,500 |
|
Land |
13,500 |
|
Total |
$30,000 |
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BUILDING
| Building |
Sq. Ft.
Utilized |
Relative
Value
Factor |
Relative
Value
Sq. Ft. |
Percentage |
Amount |
|
New Vehicle Dept. |
2,000 |
2.0 |
4,000 |
12.7% |
$ 2,100 |
|
Used Vehicle Dept. |
300 |
2.0 |
600 |
1.9 |
310 |
|
Parts Dept. |
5,400 |
1.0 |
5,400 |
17.1 |
2,820 |
|
Service Dept. |
13,300 |
1.0 |
13,300 |
42.2 |
7,340 |
|
Body Shop |
3,300 |
1.0 |
3,300 |
10.5 |
1,360 |
|
Office |
2,450 |
2.0 |
4,900 |
15.6 |
2,570 |
|
|
Total Building |
26,750 |
|
31,500 |
100.0% |
$16,500 |
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LAND
| Land |
Sq. Ft.
Utilized |
Relative
Value
Factor |
Relative
Value
Sq. Ft. |
Percentage |
Amount |
|
New Vehicle Dept. |
|
|
|
|
|
|
|
Under Building |
2,000 |
4.0 |
8,000 |
1.9% |
$ 260 |
|
|
Outside Display |
8,025 |
4.0 |
32,100 |
7.5 |
1,010 |
|
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Storage |
47,025 |
1.0 |
47,025 |
11.1 |
1,500 |
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Parking-Employee |
4,200 |
3.5 |
14,700 |
3.5 |
470 |
|
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Parking-Customer |
8,400 |
4.0 |
33,600 |
7.9 |
1,070 |
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|
|
|
|
|
$ 4,310 |
|
Used Vehicle Dept. |
|
|
|
|
|
|
|
Under Building |
300 |
4.0 |
8,000 |
0.3% |
$ 40 |
|
|
Outside Display |
30,600 |
4.0 |
122,400 |
28.8 |
3,890 |
|
|
Parking-Employee |
2,100 |
3.0 |
6,300 |
1.5 |
200 |
|
|
Parking-Customer |
4,200 |
3.0 |
12,600 |
3.0 |
410 |
|
|
|
|
|
|
|
$ 4,540 |
|
Parts Dept. |
|
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|
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Under Building |
5,400 |
3.0 |
16,200 |
3.8% |
$ 510 |
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Parking-Employee |
1,800 |
2.0 |
3,600 |
0.9 |
120 |
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Parking-Customer |
3,600 |
2.5 |
9,000 |
2.1 |
280 |
|
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|
$ 910 |
|
Service Dept. |
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Under Building |
16,600 |
2.5 |
41,500 |
9.8% |
$ 1,320 |
|
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Parking-Employee |
8,400 |
2.0 |
16,800 |
3.9 |
530 |
|
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Parking-Customer |
23,400 |
2.0 |
46,800 |
11.0 |
1,480 |
|
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|
$ 3,330 |
|
General Office |
|
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|
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|
|
Under Building |
2,450 |
4.0 |
9,800 |
2.3% |
$ 310 |
|
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Parking-Employee |
1,500 |
2.0 |
3,000 |
0.7 |
100 |
|
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|
$ 410 |
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Total Land |
170,000 |
|
424,625 |
100.0% |
$13,500 |
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SUMMARY
| Summary |
Building |
Land |
Total |
|
New Vehicle Dept. |
$ 2,100 |
$ 4,310 |
$ 6,410 |
| |
Used Vehicle Dept. |
310 |
4,540 |
4,850 |
|
Parts Dept. |
2,820 |
910 |
3,730 |
|
Service Dept. |
8,700 |
3,330 |
12,030 |
|
General Office |
2,570 |
410 |
2,980 |
|
(Unapplied Expense) |
$16,500 |
$13,500 |
$30,000 |
If the factors used above for apportionment and relative value do not correspond with the conditions in a specific situation, more equitable factors should be used.
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