Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board

Report as a Loan or an Assignment…
Sales $5,000
COS 2,500
Net Profit $2,500
(What You May Find on
the Dealership Books)
I. Note Receivable $4,000
Cash (down payment) $1,000
Sale $5,000
To record the sale of the vehicle
II. Cost of Goods Sold $2,500
Inventory $2,500
To record the cost of the vehicle sold
III. Cash $2,000
Advance Payable to Finance Company $2,000
To record advance received from
the finance company
IV. Advance Payable to Finance Company $250
Notes Receivable $250
To record collections received and
applied by the finance company to
offset the advance
V. Cash $100
Accounts Receivable $90
Interest Income $10
To record back-end distribution
payment from finance company.
Amounts and interest rate estimated.
VI. Service Fee $20
Accounts Receivable $20
To record collections received by
finance company applied to the
service fee.
19-23