Announcement

Collapse
No announcement yet.

New vehicle

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • New vehicle

    My company purchased a new vehicle. Paid in full with a check. I set up the new vehicle as an asset and credited the cash. But, how do I get the traded in vehicle off the chart of accounts? I can take it against the loan on the traded in vehicle but it leaves a balance on the vehicle asset. Please note: Our CPA will deal with the depreciation and tax consequences. What kind of journal entry should I make? We saved money by paying off the loan early with the tradein. The car dealership paid the loan off. Any help appreciated.

  • #2
    You've probably not entered the cost of the new vehicle correctly. There are multiple factors to consider, as indicated in the following spreadsheet


    Trade-ins Calculations (from Buyer's Perspective)
    Enter all numbers as positive.
    Item Traded-in
    a + Historical cost $ -
    b - Less accumulated depreciation -
    c - Less existing note payable -
    d Basis in trade-in $ -
    Item Purchased
    e + Down payment $ -
    f + Plus amount financed (exclusive of possible interest) -
    g + Plus basis in trade-in -
    h Basis in Item Received $ -
    General Journal Entry Debit Credit
    a Historical Cost of item traded $ -
    b Accumulated Depreciation -
    c Note Payable (old note) -- if paid by dealer -
    e Cash for down payment -- if you contributed it -
    f Note Payable (new note) -
    h Basic of item purchased -
    $ - $ -
    Irrelevant factors
    Sticker price
    Trade-in allowance (from seller's perspective only)
    Cash rebate if applied to down payment
    Closing costs
    The above is a schema I find useful.

    Lorin Browning
    Fellow National Tax Practice Institute
    Lorin Browning, Ph. D.
    Fellow -- National Tax Practice Institute
    lorin@lorinbrowning.com

    Comment

    Working...
    X