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Level 1

How do I record a vehicle trade in with a note and a trade in allowance?

New vehicle Purchase price $66,576
Trade in allowance $43,000
Note  new vehicle $44,234
Payoff old vehicle $20,658
Solved
Best answer 10-15-2018

Accepted Solutions
Level 15

Keep all the paperwork for your tax accountant, there is...

Keep all the paperwork for your tax accountant, there is a form they fill out for this kind of thing that is different than the accounting entries you make.  You need a tax accountant for this one.

In QB

calculate and post partial year depreciation for the old vehicle.  If you have not been claiming annual depreciation for the old vehicle, stop here and see a tax accountant - the IRS does not care if you claim depreciation expense annually, but you must calculate what you should have claimed and apply it to this situation.

Create a new fixed asset account, for the new vehicle and and a new fixed asset sub account for  accumulated depreciation

Create a new long term liability account for the new note

Then journal entries ( *** means use the account balance for that account in the journal entry, and they need to done in this sequence)
debit accumulated depreciation old vehicle fixed asset account ***
credit old vehicle fixed asset account

debit new vehicle fixed asset account
credit old vehicle fixed asset account ***

If you paid a deposit, enter the payment and use the new vehicle fixed asset account as the expense for the payment

subtract the two notes, 44,234 - 20,658 = 23,576

debit old vehicle liability account, 20,568
credit new vehicle liability account, 20,568

debit new vehicle fixed asset account, 23,576
credit new vehicle liability account, 23,576

View solution in original post

7 Comments
Level 15

Keep all the paperwork for your tax accountant, there is...

Keep all the paperwork for your tax accountant, there is a form they fill out for this kind of thing that is different than the accounting entries you make.  You need a tax accountant for this one.

In QB

calculate and post partial year depreciation for the old vehicle.  If you have not been claiming annual depreciation for the old vehicle, stop here and see a tax accountant - the IRS does not care if you claim depreciation expense annually, but you must calculate what you should have claimed and apply it to this situation.

Create a new fixed asset account, for the new vehicle and and a new fixed asset sub account for  accumulated depreciation

Create a new long term liability account for the new note

Then journal entries ( *** means use the account balance for that account in the journal entry, and they need to done in this sequence)
debit accumulated depreciation old vehicle fixed asset account ***
credit old vehicle fixed asset account

debit new vehicle fixed asset account
credit old vehicle fixed asset account ***

If you paid a deposit, enter the payment and use the new vehicle fixed asset account as the expense for the payment

subtract the two notes, 44,234 - 20,658 = 23,576

debit old vehicle liability account, 20,568
credit new vehicle liability account, 20,568

debit new vehicle fixed asset account, 23,576
credit new vehicle liability account, 23,576

View solution in original post

Level 1

Ok that helps a little but i did a section 179 on the old...

Ok that helps a little but i did a section 179 on the old vehicle last year so at this point there is no difference in the accum and asset to record.  How do I take that into consideration?
Level 15

You need a tax accountant.  Since you took the total valu...

You need a tax accountant.  Since you took the total value as section 179, and got rid of the truck before its life was over, some of that 179 deduction no longer counts and has to be recaptured as income.

And section 179 should still be entered on the books
Level 1

Rustler, your entry doesn't take into account the trade i...

Rustler, your entry doesn't take into account the trade in allowance.
Level 15

that allowance is not part of anything, it is like when y...

that allowance is not part of anything, it is like when you buy a widget, each they sell for $1 but if you buy 100, the price each is 0.50.  You enter what it costs you
Level 1

I followed these instructions exactly, but in the end the...

I followed these instructions exactly, but in the end the balance in my new vehicle account does not equal the price paid for the vehicle.   Shouldn't it equal?
Level 1

after following the steps, the new fixed asset account is...

after following the steps, the new fixed asset account is incorrect. The traded in truck accounts are correct (fixed asset, acc depreciation & liability all zeroed out) and the new asset note account is correct. How do i get the new fixed asset account to be the right amount? Currently short 14k

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