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  • Tradein Draft

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    Nadine Santiago
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    This document outlines how to account for trade-ins when selling merchandise. There are three scenarios: 1) When the trade-in value equals fair market value, the trade-in reduces the customer's receivable and increases inventory. 2) When the trade-in is worth more than fair market value, the overallowance reduces sales. 3) When the trade-in is worth less than fair market value, the underallowance increases sales. Reconditioning costs reduce the trade-in's inventory value.

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    This document outlines how to account for trade-ins when selling merchandise. There are three scenarios: 1) When the trade-in value equals fair market value, the trade-in reduces the customer's receivable and increases inventory. 2) When the trade-in is worth more than fair market value, the overallowance reduces sales. 3) When the trade-in is worth less than fair market value, the underallowance increases sales. Reconditioning costs reduce the trade-in's inventory value.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    4 views1 page

    Tradein Draft

    Uploaded by

    Nadine Santiago
    This document outlines how to account for trade-ins when selling merchandise. There are three scenarios: 1) When the trade-in value equals fair market value, the trade-in reduces the customer's receivable and increases inventory. 2) When the trade-in is worth more than fair market value, the overallowance reduces sales. 3) When the trade-in is worth less than fair market value, the underallowance increases sales. Reconditioning costs reduce the trade-in's inventory value.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 1

    TRADE-INS

    Overallowance on T-IN (T-in NRV) xx


    Inst A/R
    xx
    Inst Sales (Selling Price)

    Trade-In = FMV
    Merch Inv T-In (T-In Value of Old Merchandise)
    Cash (DP)
    xx
    Inst A/R (Bal of Sales Price)
    xx
    Inst Sales (Full Amount of Sales Price)

    xx
    cost of
    T-In

    xx

    If reconditioning expense is actually incurred:


    Reconditioning Expense
    xx
    Merch Inv T-in
    xx

    treated as reduction from Inst Sales


    Merch Inv T-In (NRV/FMV/AV) xx
    Inst A/R
    xx
    Inst Sales net (IS-OA)

    xx

    xx

    T-In < FMV (underallowance) (+)

    Trade-In > FMV (overallowance) (-)

    If perpetual:
    charged to underallowance on T-In Account
    Merch Inv (NRV/FMV/AV)
    xx {viewed as
    collection}
    Inst A/R
    xx
    Inst Sales (Selling Price)
    xx
    Underallowance on T-IN (T-in NRV) xx

    If perpetual:
    charged to overallowance on T-In Account
    Merch Inv (NRV/FMV/AV)
    xx {viewed as
    collection}

    treated as addition to Inst Sales (Selling Price)


    Merch Inv T-In (NRV/FMV/AV) xx
    Inst A/R
    xx
    Inst Sales net (IS+UA)
    xx

    If perpetual (additional entry to record COGS):


    COIS
    xx
    Merch Inv New
    xx

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