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stated interest plus the discount income GMAC earned if the
nonrate-supported RISC bore a below-market rate of interest.
C. GM's Accounting for Retail Rate Support Payments14
GM accounted for its retail rate support payment liability
as follows: When GM's liability first arose, GM recorded a sales
allowance in the amount of the retail rate support payment and an
accrued liability to GMAC in the amount of the retail rate
support payment. When GMAC actually purchased the RISC from an
independent GM dealer and GM made the retail rate support payment
to GMAC, GM eliminated the accrued liability and recorded a cash
reduction in the amount of the retail rate support payment. The
net effect on GM's balance sheet was a reduction in GM's cash
balance in the amount of the retail rate support payment. There
were no subsequent entries.
D. Consolidated Accounting
GM was required to eliminate intercompany items between GM
and GMAC in determining GM's consolidated income and balance
sheet. GM's expense for retail rate support payments was never
eliminated in determining the GM group's net book income.
Similarly, unearned income recognized by GMAC over the term of a
rate-supported RISC was never eliminated in determining the GM
group's net book income.
14 For an example, see infra p. 35.
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