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entering an asset purchase with a check as a down payment and the balance to finance

Forum|Forum|2 years ago
October 17, 2023
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I purchased company vehicle (DEBIT:asset for company vehicle account); trade in (CREDIT Company Vehicle Account) check written for down payment (CREDIT Company Vehicle Account) and a Long Term Liability account for the balance which is the amount to finance.

my question is the check written for the down payment - what account do i use to post the check properly.

QuickBooks Desktop

Best answer by Rainflurry

@jean409

Without providing the original cost of the trade-in, the journal entry below is the best I can give you. Your company vehicle asset account will stay overstated by the trade-in's original cost since you did not provide that. The trade-in value will not be part of the final journal entry but needs to be entered as a credit to balance the entry based on the limited info you provided. So, if you just need to get the down payment and loan on the books, create the following journal entry:

	Debit	Credit
New vehicle (Company vehicle asset account)	200,000
Ask my accountant (to balance)		24,000
Loan payable		125,000
Bank account		51,000

That will at least allow you to reconcile the bank account for the down payment and keep the loan balance accurate as payments are made. The 'Ask my accountant' expense account is just a placeholder and a way to flag your CPA/tax accountant to finish the entry. Your CPA/tax accountant will finish the entry by removing the trade-in's original cost (credit), closing out the accumulated depreciation (debit) and booking the difference to gain/loss. Your gain/loss is equal to the original purchase price of the trade-in less the accumulated depreciation plus $24K. So, if the trade-in was fully depreciated, your gain will be $24K.

If you know the trade-in's original cost (I'll use $100K in this example) and you know that it was fully depreciated, create this journal entry:

	Debit	Credit
New vehicle	200,000
Accumulated depreciation	100,000
Old vehicle		100,000
Loan payable		125,000
Bank account		51,000
Gain on sale of asset		24,000

Hope this helps.

Rainflurry

@jean409

The down payment can't be recorded separately from the rest of the transaction because it is dependent on the new vehicle purchase price, the amount financed on the new vehicle, and the loan payoff of the trade-in (if applicable). Ideally, this should all be recorded as one entry. I can assist further if you can give me the actual amounts of:

1) Purchase price of the new vehicle.

2) Amount financed on the new vehicle.

3) Trade-in (original cost, accumulated depreciation, and loan payoff if applicable).

4) Down payment amount.

J

jean409Author

I entered the price of the vehicle in Asset account - Company Vehicles - 200,000

I entered trade-in as credit to Company Vehicles Asset account - 24,000

I entered the down payment (by check) as a credit to Company Vehicles Asset account - 51,000

and entered a long-term Note Payable for the amount financed - 125,000

I am not concerned about the trade in since at the end of year the accountants will take care of these matters. I feel I'm missing a step.

RainflurryAnswer

@jean409

Without providing the original cost of the trade-in, the journal entry below is the best I can give you. Your company vehicle asset account will stay overstated by the trade-in's original cost since you did not provide that. The trade-in value will not be part of the final journal entry but needs to be entered as a credit to balance the entry based on the limited info you provided. So, if you just need to get the down payment and loan on the books, create the following journal entry:

	Debit	Credit
New vehicle (Company vehicle asset account)	200,000
Ask my accountant (to balance)		24,000
Loan payable		125,000
Bank account		51,000

That will at least allow you to reconcile the bank account for the down payment and keep the loan balance accurate as payments are made. The 'Ask my accountant' expense account is just a placeholder and a way to flag your CPA/tax accountant to finish the entry. Your CPA/tax accountant will finish the entry by removing the trade-in's original cost (credit), closing out the accumulated depreciation (debit) and booking the difference to gain/loss. Your gain/loss is equal to the original purchase price of the trade-in less the accumulated depreciation plus $24K. So, if the trade-in was fully depreciated, your gain will be $24K.

If you know the trade-in's original cost (I'll use $100K in this example) and you know that it was fully depreciated, create this journal entry:

	Debit	Credit
New vehicle	200,000
Accumulated depreciation	100,000
Old vehicle		100,000
Loan payable		125,000
Bank account		51,000
Gain on sale of asset		24,000

Hope this helps.

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