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CWM59
Level 1

EMD Deposit Journal Entries - Multiple companies

Good Evening Everyone,

 

I am reconciling some real estate purchases and transactions and need some help.  I paid an EMD for a property purchase from Company A.  Company B completed the sales and has ownership rights to the property.  The HUD statement lists the deposit as part of the purchase, but I need to account for the EMD. 

To square everything away - Does Company B owe Company A the EMD $ back?  

Real Estate Accounting is new to me - any help is appreciated if anyone can layout the journal entries / accounting.  

Thank You

Solved
Best answer June 23, 2022

Best Answers
Rainflurry
Level 14

EMD Deposit Journal Entries - Multiple companies

@CWM59 

 

Yes, it is best to have Co. B reimburse Co. A because you want to have all of this off of Co. A's books and you want to properly record the EMD paid in Co. B so you can transfer that to the property asset account when you close. 

 

To do this, in Co. A, set up an other current asset account called 'Due from Co. B'.  In Co. B, set up an other current liability account called  'Due to Co. A'.  Also, if you haven't already, set up Co. A as a vendor in Co. B and set up Co. B as a customer in Co. A.  

 

Then,

1) In Co. A, assign the EMD check to the newly-created 'Due from Co. B' asset account. 

2) In Co. B, create a journal entry, debit the account you use for EMDs, credit the newly-created 'Due to Co. A' liability account.

3) In Co. B, write the reimbursement check and assign it to the 'Due to Co. A' liability account.

4) In Co. A, deposit the check and assign it to the newly-created 'Due from Co. B' asset account.

 

Now, you have everything off of Co. A's books and you have the EMD ready to be applied at closing.

View solution in original post

3 Comments 3
Rainflurry
Level 14

EMD Deposit Journal Entries - Multiple companies

@CWM59 

 

Yes, it is best to have Co. B reimburse Co. A because you want to have all of this off of Co. A's books and you want to properly record the EMD paid in Co. B so you can transfer that to the property asset account when you close. 

 

To do this, in Co. A, set up an other current asset account called 'Due from Co. B'.  In Co. B, set up an other current liability account called  'Due to Co. A'.  Also, if you haven't already, set up Co. A as a vendor in Co. B and set up Co. B as a customer in Co. A.  

 

Then,

1) In Co. A, assign the EMD check to the newly-created 'Due from Co. B' asset account. 

2) In Co. B, create a journal entry, debit the account you use for EMDs, credit the newly-created 'Due to Co. A' liability account.

3) In Co. B, write the reimbursement check and assign it to the 'Due to Co. A' liability account.

4) In Co. A, deposit the check and assign it to the newly-created 'Due from Co. B' asset account.

 

Now, you have everything off of Co. A's books and you have the EMD ready to be applied at closing.

CWM59
Level 1

EMD Deposit Journal Entries - Multiple companies

@Rainflurry 

Great - thank you very much for the details!  I understand that process and can follow the accounting

AlcaeusF
Moderator

EMD Deposit Journal Entries - Multiple companies

Hello @Rainflurry,

 

I have reviewed the solution you’ve shared and it's correct and accurate. Thank you for sharing your inputs to help address the issue.

 

We love to see members supporting one another! Have a great day. 

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