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While investigating an auto dealership you calculate the following (refer to the IRS's ATG on...

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Accounting

While investigating an auto dealership you calculate the following (refer to the IRS's ATG on Auto Dealerships):

From 'window sticker':

MSRP $10,000

Destination Charges 400

MSRP Retail Total $10,400

From Dealer Invoice:

Vehicle Factory Wholesale Price $9,000

Destination Charges 400

Advertising Association 100 1%of MSRP

Holdback: 300 3% of MSRP

Total Invoice Price $9,800

Holdback: coded amount is (300) 3% OF MSRP

Inventory Cost to the Dealer $9,500

  1. What entry should the dealer make initially and when the holdback is received?
  2. Should the dealer include the holdback in inventory? Why?

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