What are the correct journal entries for the sale of a vehicle with a loan? The payoff was $13,155.38 and we sold the vehicle to a dealer for $10,000 and then wrote a check from our personal account for $3,155.38 to make up for the difference on the loan. The interest paid was $48.90. I am not sure how to enter this transaction correctly. Any assistance would be appreciated!
Big question is whether or not this vehicle, the loan, and its associated accumulated depreciation is listed on the balance sheet of the business. And how the business is taxed.
I am going to assume you are taxed as a sole proprietor and that the vehicle (fixed asset), loan, and depreciation ARE on the business balance sheet.
Create an income account called gain/loss on asset sales.
Calculate and post partial year depreciation.
Then journal entries
debit accumulated depreciation and credit gain loss for the amount in the accumulated depreciation account
debit gain loss and credit the fixed asset account for the total in the fixed asset account
enter the payment for the sale as a deposit and use the loan account as the source account for the deposit
debit the loan account and credit the owner equity investment account for the balance due on the loan.
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