How do I account for the sale of a product where the buyer offers me a trade-in? For example: My product normally sells for $5000; I accept a trade-in at a negotiated price of $2000; I estimate that the "real" value of this trade-in is $1000 (the buyer bargained well!). The actual revenue will therefore be $3000 and I'll take ownership of something worth $1000. I think I record a gross sale of $5000, a trade-in "discount" of $2000, and thus a net sale of $3000 and A/R of $3000. I then recognize the trade-in by crediting COGS by the real $1000 value of the trade-in and debit inventory by the same $1000. The future potential sale of the trade-in therefore has a cost basis of $1000. Does this sound right?
Thanks
bayviewlg