How to record new vehicle with trade-in - GAAP

USA Discussion in 'General Accountancy Discussion' started by Accountant ?, Dec 14, 2018.

  1. Accountant ?

    Accountant ?

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    just want to ensure this is correct

    traded in new vehicle that was fully depreciated on our books - car was about 9 years old, so asset bal = accum deprec

    even though car was fully depreciated, dealer gave us $ as a down payment on paper (no cash exchanged hands, but it was a reduction in the debt). 100% of the balance after the trade in was financed.

    JV:

    cr - fixed assets - old car
    db - accum deprec old car
    *Db = Cr here
    db - fixed assets - new car - fmv (cost before trade-in)
    cr - note payable - amount of new loan
    cr - gain on "sale" of asset

    Alternatively, record the disposal of the old cars - same as above and record a db and cr for the net cost of the new car.

    thank you
     
    Accountant ?, Dec 14, 2018
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  2. Accountant ?

    kirby VIP Member

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    You can't have a gain on the purchase. The value given to you by the dealer just reduces the cost basis of the car. So your second method is correct.
     
    kirby, Dec 14, 2018
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  3. Accountant ?

    ttreacy

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    I agree with Kirby - You cannot have a gain/loss on a purchased asset, only a sold asset. Therefore - you'd Debit Fixed Assets for the new car cost (loan amount) and Credit Note Payable for the loan amount for the new car.
     
    ttreacy, Jan 7, 2019
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