Discussion:Booking Van Purchase including Deferred Interst
From TaxAlmanac
Discussion Forum Index --> Advanced Tax Questions --> Booking Van Purchase including Deferred Interst
Discussion Forum Index --> Tax Questions --> Booking Van Purchase including Deferred Interst
| 13 May 2008 | |
| Facts:
Total Cash Price: 25,000 Less: Rebate (2,000) Subtotal 23,000 Add: Finance Chages 5,000 Add: Registration Fees 180 Total Cost before Rebate 30,180 Reported on 2007 Tax Depr. Sch 30,180 Reported on 2007 Tax Return (2,000) Rebate Income Originally had on books: 23,180 - Vehicles 23,000 - Vehicle Loan Now need to adjust books to correct cost RE: Van Dr. Vehicles 7,180 Cr. 5,000 - What Account? Cr. Rebate Income 2,000 Cr. Auto Reg. Fees 180 - Reclass Auto Reg to Vehicles
| |
| 13 May 2008 | |
| Explain to me why the 23,180 wasn't correct in the first place? | |
| 13 May 2008 | |
| A couple of items have gotten recorded improperly.
The $ 5,000 finance charges don't get added to the cost of the vehicle. They are periodic expenses to be charged off as paid. The $ 2,000 rebate reduces the cost of the vehicle. So, the cost shown on the books of $ 23,180 is correct. The depreciation calculation is wrong. What happens is, when the installment payments are paid off, each installment should be allocated principal/interest expense. The way you have it now and are recording it for depreciation purposes, the $ 5,000 SHOULD be increasing the loan because each installment payment includes the finance charge. What you're doing is capitalizing the interest charge. | |
| 13 May 2008 | |
| Your facts cannot be correct. Vehicle should be recorded at $23000. Your post is unclear. Sounds as though it was originally recorded as $23k but then it was set up on the depreciation schedule as $31780. Do books agree with depreciation schedule? If books show vehicle at $23k, then it is the depreciation schedule that needs to be adjusted, not the books. If books agree with depreciation schedule, credit vehicles by $7180 (and correct the depreciation schedule as well). Debit $180 to auto expense, debit $5000 to n/p (assuming the payable must be overstated if the vehicle account is overstated) and debit rebate income by $2000 to eliminate the incorrectly recorded income. | |
| 14 May 2008 | |
| Your facts cannot be correct. Must be having senior moments!
Vehicle should be recorded at $23000. Your post is unclear. Sounds as though it was originally recorded as $23k but then it was set up on the depreciation schedule as $31780. Yes. Do books agree with depreciation schedule? No, That is what I'm currently reconciling when I discovered this mistake on my part! For some reason I was thinking you could capitalized the interest however know when I try adjusting books at YE for 2007 realize....uh....what were you thinking! If books show vehicle at $23k, then it is the depreciation schedule that needs to be adjusted, not the books. Actually looks like have to amend 1040 for 2007...Vehicle is overstated. It definitely appears so...don't see any other way... If books agree with depreciation schedule, credit vehicles by $7180 (and correct the depreciation schedule as well). Debit $180 to auto expense, debit $5000 to n/p (assuming the payable must be overstated if the vehicle account is overstated) and debit rebate income by $2000 to eliminate the incorrectly recorded income. | |
