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Join nowWe built a house taking out a loan and did draws on the loan throughout.
We have now sold the house and closed on the property and paid off the loan through the closing of the property, making a profit. How do I show in quickbooks: 1) that the loan is paid off through the closing and now has a zero balance/closed loan. 2) profit that we received in the form of a paper check. 3) closing costs?
All of the loan draw expenses should have been added to the WIP (work in progress asset for the construction, works for flips as well)
The loan then just exists as a loan to be paid whenever
You should have a HUD-1 from the sale. This you duplicate in a journal entry for the seller side. Then once that is balanced you can include the calculations of removal of assets and ultimate gain. It is better to do this in a second journal entry so that the HUD-1 is represented exactly as printed in one entry.
I will make something up and illustrate.
You bought the lot for $50k
You have expenses of materials $150k
Subcontractors paid $50k
Internal payroll per this job $50k
Net WIP expenses $300k
You had some money on hand for payroll so only borrowed $250k
Now, you sold the finished product for $400k, with closing costs of $50k
For ease of calculation we are using round numbers and assuming they include all closing costs (they won't and closing costs will adjust profit downward)
JE1
Credit : WIP asset $400k for the selling price
Debit: Loan payoff $250k
Debit: Closing costs in the HUD-1 $50k
Debit: Accounts Receivable $100k and then deposit the check or post directly to banking
It is, as I said more complicated and because of direct expense costs in the closing you get a smaller check.
At this point, the WIP should now be negative $100k
JE2
Debit: WIP $100k
Credit: Income (Gain on sale) $100k
You could add the two lines in JE2 to the bottom of JE1 and combine but end result is the same
Credit : WIP asset
Thank you so much. This really helps.
Thank you so much. This helps tremendously.
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