How to enter trade-ins

I can't even find the box. My method appears to work. It does so on the premise that the trade in is not a reduction of sales but an inventory purchase paid for with a reduction in AR

Macy:

I suggest you enter line 3 into QB and look at the transacations it creates. It won't be what you thought should happen. Oh, it does help to understand this if you already have a trade in item in inventory before you enter line 3.

Perhaps we have found your box.

Seems like everyone has forgotten how QB values inventory.

Macy wrote:

In the retail trade I'm in (musical instruments), it is frequently sold for less than the trade-in value. Trade-in value is only something that makes the customer feel good. Lets say the new item costs me $100 from the wholesaler and the MSRP is $200. Realistically in this industry, just about everything is sold for 30% less than MSRP. If a customer wants to trade his old guitar, the invoice will show list price of $200 less perhaps 35% trade-in. Normally in a cash transaction the customer would have paid $140 cash. But with his trade he gets $70 off MSRP and pays only $130. The customer is really only getting $10 for his trade but the invoice shows $70 trade-in. Since his old guitar used up $10 of my margin, I must sell it for at least $20. So the invoice says $70 trade-in and it re-sold for $20. It's not really a loss because I have only $10 of margin tied up in it, and never went below my cost of $100 on the new item. A dealer never (if he has any sense), never offers a trade-in value that exceeds his margin on the new item. I'm not going to buy anything from the customer with my money. You're correct, there is no sense to some tax laws and in this circumstance, you're correct. We tax the used item twice to make up the difference on the new item. The key thing is that the manufacturer's suggested retail price has no real meaning insofar as value and selling price are concerned. It's artificially high to make the customer feel happy that he's getting a good deal. Selling musical instruments today is not like in days of old. Today it's more akin to selling used cars.

Bob

"Intuitive" in any software is only a myth that exists in the minds of developers.

Bob

Macy,

Are you suggesting that when an item is sold and sales tax is charged an indelible mark should be made on the item so subsequent sales of the item will not trigger any additional sales tax?

Bobby Boy means its more like selling new cars. The dealer offers the buyer an absurd high trade-in value for their old beat up piece of s*it. The buyer realizing the dealer is really stupid jumps at the opportunity to take advantage of the dumb bastard :)

On the contrary, when I become King of the world, sales tax will be charged on the full sales price of the new item ignoring any trade in. The trade in will be taxed at what ever sales price it is sold at and ignoring any trade in value that may have been used..

When I do become King of the world, I will hire Allan and Bob to administer the sales tax. We do not need to discuss it any more until after the coronation.

The coronation will occur when the feds replace the State sales taxes with the Federal Value Added Tax.

Bob

GCG, I did all the transactions in QBs before I posted. I was able to achieve what I thought were the correct results in the GL. Are you alluding to the average cost? My thought was that fungible trade ins would be in the same inventory item and have the same trade in value or cost. Trade ins that had unique values would have their own inventory item..

I am now wearing the box since I lost my pants for lack of a black belt.

Macy

Ah, yes. Depending on what your are taking in trade the value of the trade, the average cost of the inventory item, and perhaps some form of sales discount for the difference between value and amount of credit will need to be figured as well.

New product going back into inventory is easy. Something like used repairable car parts is not so simple.

Replace? You are naive aren't you

I prefer the term idiot.

You make a good point. Perhaps it should be re-worded, "Federal Value Tax Added".

Bob

Inevitable Worse yet is the minions will go with little fight. The only hope is the business person. I get folks all day long adding sales tax when it is not required. They have been assimilated.

GCG, So what is the correct way to record a sale with a trade in?

Macy

I can give a hint but the belt will no longer be offered.

Why don't you just give the solution; your thread is about to die.

It's tax time and games are a luxury.

It's not my thread. It belongs to Bobby Boy. I also diagree, this topic is like rock and roll, it will never die.

Allan, will you be giving the hint in my life time? As I posted, I no longer have need of the belt and have put the box to alternative uses.

I discovered that the method I used when converted to from accrual to cash basis creates some strange mystery numbers.

You are right rock 'n roll is here to stay and I will dig it to the end but I do change stations on occasion.

Macy