How do I post the income from a partial sale of my business? I have a double entry system. Part of the sale price offsets a goodwill asset purchased years ago. Part of the sale price was for inventory, and the balance was for equipment. I posted a debit to Undeposited Funds, and a credit to each of the three categories, but the only one that shows in income is the equipment price because the equipment was fully depreciated. A credit to Undeposited Funds goes to a debit to the checking account.
USA Bus. Sale Entries
- Thread starter SJCo
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You have a lot more work to do.
Depending upon when the Goodwill was purchased, there may or may not be Accumulated Amortization - at one time Goodwill was not amortizable as a Section 197 asset. Then one year IRS acknowledged it was eligible.
Inventory is a dollar for dollar exchange usually, but there could be a profit/loss on it as well.
And the Equipment as well as the Accumulated Depreciation accounts must be reversed out against the sales price for that.
I suggest you look at IRS Form 8594 for the sale of business assets in a basket sale.
This form needs to be completed and submitted by BOTH buyer and SELLER on their respective tax returns after the sale,
unless there's an installment sale. It involves more than just a simple bookkeeping entry.
Depending upon when the Goodwill was purchased, there may or may not be Accumulated Amortization - at one time Goodwill was not amortizable as a Section 197 asset. Then one year IRS acknowledged it was eligible.
Inventory is a dollar for dollar exchange usually, but there could be a profit/loss on it as well.
And the Equipment as well as the Accumulated Depreciation accounts must be reversed out against the sales price for that.
I suggest you look at IRS Form 8594 for the sale of business assets in a basket sale.
This form needs to be completed and submitted by BOTH buyer and SELLER on their respective tax returns after the sale,
unless there's an installment sale. It involves more than just a simple bookkeeping entry.
Thank you. That gives me more information, yet I still need bookkeeping entries. The goodwill was not amortized. There was no gain or loss on the inventory-- it was a dollar for dollar sale. As I said, equipment account was at zero, so the amount received for equipment was pure gain/income. I will look at IRS Form 8594. Thanks.
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It appears then that amount paid is equal to the full amount of goodwill and inventories, and above the net book value of the property, plant and equipment, so it is correct that there is only a gain for the payment value above the net book value of the property, plant and equipment.
Dr Cash at Bank (as you had done)
Dr Accumulated Depreciation of Property, Plant and Equipment
Cr Goodwill
Cr Inventories
Cr Cost of Property, Plant and Equipment
Cr Gain on Disposal
Sorry, am I missing something.
Dr Cash at Bank (as you had done)
Dr Accumulated Depreciation of Property, Plant and Equipment
Cr Goodwill
Cr Inventories
Cr Cost of Property, Plant and Equipment
Cr Gain on Disposal
Sorry, am I missing something.