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alphafsc
Level 1

Should I increase Expenses (at P&L) on down-payment, when placed in services or it will be done when accruing depreciation over next 5 years?

Hi there,
I am 1 year Quickbook’s user, naturally came to depreciation period. Input data: 5-years vehicle, GDS, SL. Truck was purchased with loan, 30K was down-payment done and 70K was loan performed. So, my entities, when placed in services, are (at balance):
Dt Vehicles, Ct Cash, Amount 30K
Dt Vehicles, Ct Accounts Payable, Amount 70K
Question A: should I increase Expenses (at P&L) on 30K, when placed in services or it will be done when accruing depreciation over next 5 years? What will be the depreciation basis value – 100 or 70K? Looks like 100K (due to amount on Dt Vehicles), but does it meat, that I will double my expenses (in part of 30K paid as down-payment) when accruing depreciation over next 5 years?
Question B: In fact, the issue is much deeper the one described above. The vehicle, was damaged at 2018 (the year of purchasing, being used 10 months) and insurance company paid 25K as recovery (was booked as “Other income”). Now I have hard times figuring out what exactly value should be withdrawn from income as Depreciation, what should be withdrawn from “Vehicles”. I want to avoid expenses’ double booking.
Will be grateful, for any of your answer due to above, both questions A and B.
3 Comments 3
Anonymous
Not applicable

Should I increase Expenses (at P&L) on down-payment, when placed in services or it will be done when accruing depreciation over next 5 years?

It sounds like the vehicle cost was $100 - that is amount that should be in the asset cost account and will also be the basis for the depreciation schedule. The initial deposit should not be anywhere on the income statement.

If the depreciation schedule you are applying to vehicle is 5 yr straight line then last years depreciation expense will be $20 (pro-rated if the vehicle was purchased part way into the year).

Above assumes vehicle was owned throughout the year.

Question B - not clear 

was the vehicle written-off (gone) and you recovered $25K? Or do you now have a badly damaged vehicle plus $25 cash, or do you have a vehicle that had $25K of repairs done to it last year?

 

alphafsc
Level 1

Should I increase Expenses (at P&L) on down-payment, when placed in services or it will be done when accruing depreciation over next 5 years?

Thank you for reply.

Truck was totally damaged. Insurance company refunded 25K to us and also they paid-off our loan at the bank and took the truck

Anonymous
Not applicable

Should I increase Expenses (at P&L) on down-payment, when placed in services or it will be done when accruing depreciation over next 5 years?

So you had a write-off accident and got most of your money back from insurance.

That is recorded the same as if you sold the vehicle and the amount the insurance co paid was the sale price.  Note the amount paid by insurance is the total of the bank loan settled and the cash you received.

When a vehicle is sold you have to remove both the asset (cost) plus any accumulated depreciation that had been previously recorded in its life.

Typically the sale proceeds, plus the cost and Acc.Dep are all posted to a single 'other income' type account called "gain/loss-sale of assets".

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