Post Vehicle Purchase with Trade-In & Gain

This article addresses how to post a new business vehicle purchase that includes a trade-in of the old business vehicle and income gain from the disposal of this old vehicle.

So, let’s get right to it.

The scenario is: You purchased a new business vehicle at the dealership for $37,500 and traded in the old business vehicle, that is currently in your books as a fixed asset, for $14,000. You also took out a loan (from the dealership) to finance the remaining balance of this new vehicle purchase.

Let’s also say, right now in your books, for the old business vehicle, there is currently a purchase to depreciation value still at $5000. In other words, you had purchased the old vehicle some years back and were taking a depreciation deduction each year on your tax return, but there is still $5k left to deduct for depreciation of the old vehicle in your books.

The old vehicle fixed asset needs to be adjusted down to zero in your books, effectively removing it from your books, while the new vehicle purchase needs to be added in your books.

The $5k leftover depreciation balance, as discussed above, needs to be offset to that $14k trade-in value you received from the dealership.

All this above, can be recognized in one journal entry in your books. Prior to this of course, you will need to create new fixed asset accounts in your books to post the new vehicle purchase and accumulated depreciation. You will also need to create a corresponding loan account for this new vehicle.

Once these new accounts are all set in your books, now you can post the following similar journal entry:

Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.