We took out a loan to help finance a new equipment purchase. The total equipment purchase is right around $62,000. We are financing $50,000. The $50,000 is going to be directly deposited into our bank account so we can pay the equipment provider directly. We will the owe the bank that loaned us the money. Several questions:
1. How do I record the deposit so it doesn't look like income?
2. To set up the loan, do I just set up a JE crediting the long term-liability and debiting the Fixed Asset? Do I put the principal amount borrowed or what the total amount will be once they account for interest/finance charge? I do always set up an Interest Expense account for each piece of equipment so that interest can be tracked.
3. We provided $5,200 down and will be providing another $6,450 when we go to pick up the equipment. How do I account for this? It doesn't seem correct to add this an expense since it's money off of a fixed asset.
We are going to depreciate the entire amount in 2019 and in the past I have just set up an accumulated depreciation account under each Fixed Asset. Normally when we purchase equipment no money is deposited into the actual account, we just make the loan payments so I am thrown off here on what to do. Thank you so much in advance for the help!
