accounting issues?

Question

RVI sells mid-sized to large, new and used vehicles. A selling discount occurs when the buyers sign an agreement with RVI. under the agreement, RVI cares for the vehicle when the owners are not using it, rent the vehicles to third party. the risk of theft is significant for these types of vehicles, therfore RVI ensures the pwners have insurance coverage. but the insurance company complains about excessive claims and losses and no longer allowed the insured vehicles to be rented out. most owners switched insurance company, but there are currently 10 vehicles on the lot with no insurance, and not covered by any other insurance. RVI has not be able to get in touch with their owners. discuss this issue. is this a financial reporting issue? please answer me as detail as possible.

Answer 1

This is an uninsured vehicle issue. RVI is effectively self-insuring these, as conditions have changed and the third party insurer isn't covering it any more.

RVI should lock these vehicles up in an enclosed unit, and not rent them out any more.

Answer 2

let me get this straight, RVI sold the units to buyers at less than the normal price with the consideration of the agreement that allows them to rent them out to 3rd parties under some kind of revenue sharing deal, correct?

10 owners haven't provided new insurance after the original company cancelled the policies, correct?

and someone at RVI stupidly didn't include a forced insurance clause in the contract, so RVI can't buy the insurance on the "buyers" behalf at their expense?

I suggest that RVI should:
A) file suit against the non-complying owners [with service of suit via the usual means]
B) write off the remaining sale discounts, for those 10 units only, as a loss.

my guess is that RVI will be unable to recover enough from the sale of the units to both cover the likely debt on them and the costs of enforcing the contracts plus the remaining sale discounts.


Btw, RVI needs a new attorney to draft the discount for rental contracts as well.

Answer 3

RVI must not drive or rent out the uninsured vehicles. Doing so would violate state laws prohibiting operation of uninsured vehicles.