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How do I record purchase of an existing business where buyer put money down and seller is financing the balance?

My client purchased a salon for $120K (per sales agreement: $10k inventory, $50k FF&E, $60k goodwill). They put 20k down and financed the remaining 100k with seller carrying the note.  What's the best way to record this (J/E)?  Also, after physical evaluation of FF&E and inventory (they did not do this prior to purchase), the actual values are less than $60k, closer to around $20k. Can you allocate the difference to goodwill or just stick with original figures since that's what's on the official sale agreement?

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Best answer 09-09-2019

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you do not revalue, the cost you paid is what it is per t...

you do not revalue, the cost you paid is what it is per the agreement.

you can not stock inventory type items in QB using a journal entry, QBO Plus is the only version with inventory type items.  And going forward you never use a journal entry for inventory type items in QB.

Inventory requires a listing of items, qty and total value for that qty in order to get it entered.

FF&E is the same as inventory basically, you should have a book value per fixed asset as part of the sales agreement, that purchase book value is your starting fixed asset cost.

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I have something similar to this. The purchaser has bough...

I have something similar to this. The purchaser has bought a business with some money down and making payments to the seller. The agreement includes job supplies and two trucks. I am going back to enter this information from the beginning of the year, but I am confused as to how I would book or account for this entry. Please assist. Thank you.
Established Community Backer ***

@se You start with the balance sheet you should have rece...

@se
You start with the balance sheet you should have received showing the assets and liabilities for the company on the date of sale.  That gives you book value for the assets which is your cost.

Established Community Backer ***

you do not revalue, the cost you paid is what it is per t...

you do not revalue, the cost you paid is what it is per the agreement.

you can not stock inventory type items in QB using a journal entry, QBO Plus is the only version with inventory type items.  And going forward you never use a journal entry for inventory type items in QB.

Inventory requires a listing of items, qty and total value for that qty in order to get it entered.

FF&E is the same as inventory basically, you should have a book value per fixed asset as part of the sales agreement, that purchase book value is your starting fixed asset cost.

View solution in original post

Not applicable

Re: you do not revalue, the cost you paid is what it is per t...

I have something similar to this as well.  I have the fixed assets recorded.  It's a service business, so there is no inventory.  Most of the value of the business comes from the pre-existing customers.  I don't understand how to enter the loan that the seller is financing.  I have a liability account created, and know that I would credit that with the loan amount, but what do I debit?  It seems like it should be an equity account, but Opening Balance Equity doesn't seem right.  Please advise.

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