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34 views3 pages

Accounting For Repossessed Vehicles 3 Per Page

Uploaded by

rishabh.chhabra2002
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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10/23/2019

Accounting for
Repossessed Vehicles
Lonnie Leh, CPA, MBA
Sr. Manager, Audit Services

Pennsylvania Credit Union Association


1

Accounting Entries
• The initial write-down of the loan to the fair
market value of the vehicle is posted to the
Allowance for Loan Losses as follows:
o Debit: GL 719 (Allowance for Loan Losses) – Difference
of Loan Balance and Fair Value of vehicle
o Debit: GL 798 (Assets Acquired in Liquidation of
Loans) – Recorded at Fair Value of vehicle less
estimated costs to sell
oCredit: GL 701 (Loans) – Remaining Balance of Loan
2

Accounting Entries
• Example: If the remaining balance of the loan is $19,000 and the Fair
Value of the repossessed vehicle is determined to be $10,000, then your
entry to record the initial write-down on the loan would be:

Debit Credit
GL 719 (Allowance for $9,000
Loan Losses)
GL 798 (Assets acquired $10,000
in Liquidation of Loans)
GL 701 (Loans) $19,000

1
10/23/2019

Accounting Entries
• If the vehicle sells for less than the estimated
fair value, the CU will recognize a loss
• The loss will be shown as a Non-Operating
Loss on the Disposition of Assets in GL 430 –
Gain (Loss) on Disposition of Assets.

Accounting Entries
• Example: If the repossessed vehicle sells for only $8,000 (instead of the estimated
fair value of $10,000), the CU would receive $2,000 less than originally estimated
on the sale of the repossessed asset. The entry to record the loss would be as
follows:
Debit Credit
GL 731 (Cash) ($8,000)

GL 430 (Loss on ($2,000)


Disposition of Assets)
GL 798 (Assets Acquired ($10,000)
in Liquidation of Loans)

Accounting Entries
• If the repossessed vehicle sells for more than
the estimated fair value, then the CU would
recognize a recovery on the loan up to the
amount charged off.

2
10/23/2019

Accounting Entries
• Example: If the repossessed vehicle sells for $12,000, the CU would recognize a
$2,000 recovery on the loss originally written off as follows:

Debit Credit
GL 731 (Cash) ($12,000)

GL 719 (Allowance for ($2,000)


Loan Loss)
GL 798 (Assets Acquired ($10,000)
in Liquidation of Loans)

Audit Staff
Kim Zelna, CPA, CUCE, BSACS
AVP, Compliance & Audit Services
[email protected]
800-932-0661 ext. 2235

Gregory Westwood, AAP, BSACS, CCUAI James Hancox


Manager, Audit Services Senior Auditor
[email protected] [email protected]
800-932-0661 ext. 2204 800-932-0661 ext. 2224

Lonnie Leh, CPA, MBA Dana Fischer


Senior Manager, Audit Services Auditor
[email protected] [email protected]
800-932-0661 ext. 2270 800-932-0661 ext. 2274

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