How do I book the purchase of a new vehicle with a trade-in and the payoff of the trade-in's note.

That can seem confusing if you've never done it before. Are you trying to learn how to do this for class, or is this a real life thing? If you need to do it for a real company, if I have the info I can tell you what to do.

You need to catch depreciation up first. If you have a chart that contains depreciation for all your items, you need to take the proportional share for this fiscal year. Once depreciation is caught up, you can then get current book value.

The difference between the trade-in and the current book value is your gain or loss. You have to back out both the old vehicle and back out the accumulated depreciation that goes along with it. Then put in the new vehicle. (In the U.S. you can't take a gain on a like-item trade-in. You'd want to reduce the new vehicle's cost by any gain.)

I'm not sure about that note. Are you saying you're also paying off a note that's still attached to the old vehicle? Or do you have a new note? If that's the old note, are you also paying the difference between that and what they want for the new one all in cash? I'm not getting the payment terms.

Hi,
This is real life. Bought new truck, traded in an old truck with a note still payable. Note was paid by the dealer and new truck was financed fully. No cash was involved. I know about the depreciation and all the other entries; just having trouble applying the credit side of the old note payoff.

There's: new vehicle
Old vehicle
Depreciation
Old note payble
New note payable

Appreicate your help.

Just debit out the old note and credit in the new. The difference in everything should still just be your gain or loss. Paying off your note is nothing but some promotional, advertising stuff anyway, and in reality, it's just going to affect how much they want for the new truck in the end.

Let's say you would have had a loss of $5000 due to the different between book and trade-in allowance. And you have a $3000 note still due. They pay the note. Well, whether it's direct or not, they still want that money. So they simply tell you the trade-in is $3000 less than what they would have allowed. (A number unknown to you.) So when you figure it out, the loss actually comes out to $8000. Except, if you instead just enter everything else and let the gain/loss be the balancing number of your entry, the removal of the old note is going to balance that $3000 back the other direction and your loss is back down to the $5000.

In other words, don't try to figure gain/loss. Just make sure you debit new vehicle, credit old vehicle, debit accum. Depreciation, debit old note, credit new note. You said there's no cash. So what's missing in the entry, a debit or credit? If there's a debit missing, you have a loss. If there's a credit missing, you have a gain. If you have a gain, dump it off there and reduce the new vehicle by that amount. It should just work out.