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Existing Mortgage New Company File

Hello, I started using QB (I amnot an accountant) and am trying to set up my company file properly starting at the beginning of 2019.  I have an existing property with a loan that originated in 2012 for $150K ($170K with 20K down).

 

I set up the loan as a long term liability and made a journal entry that credited this and debited Opening Balance Equity.  I did not enter a fixed asset with 170K (should I?).

 

Anyway, I am attempting to show all the past payments from 2012 to 12/2018 as a single line item, but am unsure what type of JE to make.  Should I create a Bank called "Previous Payments" with an amount to match what I paid, or is there a better way to handle this.

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Best answer 07-17-2019

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Established Community Backer ***

Re: Existing Mortgage New Company File

Quick example. You purchased property for 170k just there are closing costs (transfer tax - recording deed- etc) that must be added to the asset value. Let's assume 10k. You may also have costs directly related to loa. These can be separate and amortized over life of loan.

 

So now the asset is 180k but land is assessed at 20% of total assessed value. Thus your land value would be 36k and building only 144k. This has no effect on the 150k loan whose 1.1 balance of maybe 140k is entered against OBE.

 

If you depreciated against 170k that was wrong and you may need to file amended returns. So you enter in my example 180k as asset split between land and building. Enter depreciation taken through last year. It all affects OBE.

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Established Community Backer ***

Re: Existing Mortgage New Company File

Your 1.1.19 entry for beginning balance on loan is not original amount but is current balance as of that date. No consideration in books going forward is made for past payments outside of there now being a lower balance.

 

Yes add the asset at original acquisition and also enter accumulated depreciation through 12.31.18  these also post to OBE.

Established Community Backer ***

Re: Existing Mortgage New Company File

BTW - with property land must be separated from improvements. Land value cannot be depreciated for expense but stays on books at initial value. You have to add most closing costs to total asset and then using tax assessment as best and supportable determination allocate total asset value between land and improvements.

Frequent Explorer *

Re: Existing Mortgage New Company File

OK, if I understand what you are saying I need to add the $170K for the fixed asset less depreciation, but ignore any past payments and just showing the loan origination for 12/31/18 and the remaining balance on the loan?  Building and land purchased together BTW

 

Also, should I be posting to OBE and not the fixed asset?  How should I get the OBE back to zero?

Established Community Backer ***

Re: Existing Mortgage New Company File

All beginning balances from your 12.31 balance sheet are entered as of 1.1 and all post to OBE. At year end it takes care of itself - you do not have to zero out OBE. It represents your equity or business value as of date you started using quickbooks.

 

Despite land and building being bought together you cannot depreciate the land value. It has to be separated from The rest.

Established Community Backer ***

Re: Existing Mortgage New Company File

Quick example. You purchased property for 170k just there are closing costs (transfer tax - recording deed- etc) that must be added to the asset value. Let's assume 10k. You may also have costs directly related to loa. These can be separate and amortized over life of loan.

 

So now the asset is 180k but land is assessed at 20% of total assessed value. Thus your land value would be 36k and building only 144k. This has no effect on the 150k loan whose 1.1 balance of maybe 140k is entered against OBE.

 

If you depreciated against 170k that was wrong and you may need to file amended returns. So you enter in my example 180k as asset split between land and building. Enter depreciation taken through last year. It all affects OBE.