- 37 -
the fleet customer who used the $1 million as consideration for
the purchase of the fleet vehicles. GM then paid $42,400 to GMAC
(altogether, the fleet rate support example).
a. GMAC
In the fleet rate support example, when GMAC made the loan
for $1 million, it recorded the following items on its books:
Fleet purchaser receivable $1,000,000
Rate support receivable 42,400
Cash (1,000,000)
Unearned income (42,400)
When GMAC received the $42,400 fleet rate support payment,
GMAC increased its cash by $42,400 and eliminated the rate
support receivable. The net effect on GMAC's balance sheet was
as follows:
Fleet purchaser receivable $1,000,000
Cash (957,600)
Unearned income (42,400)
b. GM
In the fleet rate support example, GM accounted for its
fleet rate support payment liability as follows: When GM's
liability first arose, GM recorded a $42,400 sales allowance and
24(...continued)
support payment to be $42,400 (the difference between the
$1,000,000 face value of the note and the $957,600 fair market
value of the note). This appears to be a mathematical error--the
fair market value based on a loan with a $1 million principal
balance at 8 percent for 48 months when the market rate of
interest is 10 percent is $962,557, and the fleet rate support
payment therefore is $37,443. For convenience, we shall use the
parties' figures.
Page: Previous 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 NextLast modified: May 25, 2011