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A
arkvalleyinfo
December 11, 2018
Solved

What is the journal entry for sale of a fixed asset, including payoff of a mortgage loan and net gain on the transaction?

  • December 11, 2018
  • 4 replies
  • 0 views

We paid $65,900.00 for a rental home, put 3,650.00 capital improvements on it, and sold it for 82,000.00. We had a mortgage 45,000.00 on it that was paid off when we sold it. I'm stuck on how to record the sale of this asset, showing the closing cost and net gain on this journal entry. In which type of account do I record the net gain? 

Is it like this? What am I doing wrong?

Mortgage Payable    debit 45,000.00

Closing costs            debit    6,000.00

Cash account            debit  31,000.00

Our Rental Home                                                          credit  65,900.00

Capital Improvements                                                 credit     3,650.00

Net gain                                                                                        12,450.00

Thank you for your help.

  

    Best answer by vpcontroller

    In which type of account do I record the net gain? 

    • Account Type = Other Income*
    • Account Name = Sale of Fixed Assets


    * Or just regular income account type. It depends upon advice you may get from your CPA or Tax Accountant.

    4 replies

    vpcontroller
    vpcontrollerAnswer
    December 11, 2018

    In which type of account do I record the net gain? 

    • Account Type = Other Income*
    • Account Name = Sale of Fixed Assets


    * Or just regular income account type. It depends upon advice you may get from your CPA or Tax Accountant.

    R
    RERookie
    June 8, 2021

    I have similar scenario.  How do I net out the down payment I made from the gain.

     

    Purchase price: $255,000

    Down payment: $52,000

    Sale Price: $368,365

     

     

    Here's my original journal entry for trhe down payment when I made the purchase of property

    Bank Cash debit - $52,000

    Equity credit                         $52,000

     

    Here's my entry for the recent sale (rounded)

    Mortgage Balance debit  -   $200,000

    Mortgage Interest debit -     $365

    Escrow debit -                     $1000

    Fees (realtor, title, etc) debit $30,000

    Proceeds from sale debit     $137,000

    Property Fixed Asset credit -                   $241,000

    Land Fixed Asset credit -                        $14,000

    Accum Depreciation credit -                    $24,000

    Property Sale Income credit                    $89,365

     

    That Income seems high as it includes my down payment in there.  What am I doing wrong?

     

    Linkasink
    Linkasink
    December 29, 2022

    The down payment needs to show in the asset (value of the house) for which you paid 

    qbteachmt
    qbteachmt
    December 11, 2018

    We don't know your entity type. We don't know how long you owned this property. We don't know what your prior tax years reported for depreciation. We don't know your adjusted basis.

     

    We don't know enough to help with this tax rule question.

     

    You really need the guidance of your CPA for what the values are going to be for which part of the activity.

      A
      arkvalleyinfoAuthor
      December 11, 2018
      How do you show sale of a trading business in the accounts for the last year of the business
      Q
      QBsguru
      January 14, 2019

      You are close.  Start out with crediting the original purchase price.  Credit improvements if you capitalized these.  Credit any depreciation taken.  Debit the loan balance.  What ever is left over is gain or loss on the sale.

        A
        Arpan11
        August 6, 2019

        Whatever I understand is, Debit the loan (if any) Debit Accumulated Depreciation (up to date of Sale), Debit the Sale Proceeds received, Credit Historical Value (Original Cost), Credit Improvement Exp (if any), Credit Selling expenses if any. The difference may be Gain or Loss. If Gain then Credit and if Loss, then Debit.

          T
          Taxandbooks
          January 23, 2023

          And what about the depreciation?

          S
          SirielJeaB
          January 23, 2023

          It's nice to see you here, @Taxandbooks. I appreciate you for dropping by the Community.

           

          Depreciation is the gradual decrease in the value of a company's assets. It is the process by which assets lose value over time. You can set up an asset account to track depreciation. Here's how:

           

          1. Make a fixed asset account for each asset (or group of assets) that will be depreciated. The account can represent a single asset or a collection of related assets.
          2. Create two subaccounts for each asset account. One subaccount records the asset's purchase price, while the other records accumulated depreciation.
          3. Set up an expense account to track depreciation costs.

           

          Please read this article for more detailed steps and information: Set up asset accounts to track depreciation in QuickBooks Desktop.
           

          To understand more on how depreciation works, feel free to read this article: What is depreciation and how is it calculated?

           

          You can also record depreciation with a Journal Entry. I'd recommend consulting with your accountant first. They can suggest which accounts to use while ensuring that your books are accurate. You can also find an accountant by visiting this link: Find an accountant.

           

          Check out the following articles that will guide you in managing your business accounts in QuickBooks Desktop:

           

          Helping you at any time of the day is our priority. Please don't hesitate to click the Reply button below if you have additional questions about depreciation or any QuickBooks-related concerns. I'm always looking forward to helping you. Have a nice day, Taxandbooks.
           

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