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Flower700
Level 1

What is the journal entry for sale of a fixed asset, including payoff of a mortgage loan and net gain on the transaction?

We paid $65,900.00 for a rental home, put 3,650.00 capital improvements on it, and sold it for 82,000.00. We had a mortgage 45,000.00 on it that was paid off when we sold it. I'm stuck on how to record the sale of this asset, showing the closing cost and net gain on this journal entry. In which type of account do I record the net gain? 

Is it like this? What am I doing wrong?

Mortgage Payable    debit 45,000.00

Closing costs            debit    6,000.00

Cash account            debit  31,000.00

Our Rental Home                                                          credit  65,900.00

Capital Improvements                                                 credit     3,650.00

Net gain                                                                                        12,450.00

Thank you for your help.

  

Solved
Best answer December 10, 2018

Best Answers
vpcontroller
Level 11

What is the journal entry for sale of a fixed asset, including payoff of a mortgage loan and net gain on the transaction?

In which type of account do I record the net gain? 

  • Account Type = Other Income*
  • Account Name = Sale of Fixed Assets


* Or just regular income account type. It depends upon advice you may get from your CPA or Tax Accountant.

View solution in original post

8 Comments 8
vpcontroller
Level 11

What is the journal entry for sale of a fixed asset, including payoff of a mortgage loan and net gain on the transaction?

In which type of account do I record the net gain? 

  • Account Type = Other Income*
  • Account Name = Sale of Fixed Assets


* Or just regular income account type. It depends upon advice you may get from your CPA or Tax Accountant.

View solution in original post

qbteachmt
Level 15

What is the journal entry for sale of a fixed asset, including payoff of a mortgage loan and net gain on the transaction?

We don't know your entity type. We don't know how long you owned this property. We don't know what your prior tax years reported for depreciation. We don't know your adjusted basis.

 

We don't know enough to help with this tax rule question.

 

You really need the guidance of your CPA for what the values are going to be for which part of the activity.

besteasybooks
Level 1

What is the journal entry for sale of a fixed asset, including payoff of a mortgage loan and net gain on the transaction?

How do you show sale of a trading business in the accounts for the last year of the business
qbteachmt
Level 15

What is the journal entry for sale of a fixed asset, including payoff of a mortgage loan and net gain on the transaction?

What is a "trading" business?
QBsguru
Level 7

What is the journal entry for sale of a fixed asset, including payoff of a mortgage loan and net gain on the transaction?

You are close.  Start out with crediting the original purchase price.  Credit improvements if you capitalized these.  Credit any depreciation taken.  Debit the loan balance.  What ever is left over is gain or loss on the sale.

Arpan
Level 1

What is the journal entry for sale of a fixed asset, including payoff of a mortgage loan and net gain on the transaction?

Whatever I understand is, Debit the loan (if any) Debit Accumulated Depreciation (up to date of Sale), Debit the Sale Proceeds received, Credit Historical Value (Original Cost), Credit Improvement Exp (if any), Credit Selling expenses if any. The difference may be Gain or Loss. If Gain then Credit and if Loss, then Debit.

RERookie
Level 1

What is the journal entry for sale of a fixed asset, including payoff of a mortgage loan and net gain on the transaction?

 
RERookie
Level 1

What is the journal entry for sale of a fixed asset, including payoff of a mortgage loan and net gain on the transaction?

I have similar scenario.  How do I net out the down payment I made from the gain.

 

Purchase price: $255,000

Down payment: $52,000

Sale Price: $368,365

 

 

Here's my original journal entry for trhe down payment when I made the purchase of property

Bank Cash debit - $52,000

Equity credit                         $52,000

 

Here's my entry for the recent sale (rounded)

Mortgage Balance debit  -   $200,000

Mortgage Interest debit -     $365

Escrow debit -                     $1000

Fees (realtor, title, etc) debit $30,000

Proceeds from sale debit     $137,000

Property Fixed Asset credit -                   $241,000

Land Fixed Asset credit -                        $14,000

Accum Depreciation credit -                    $24,000

Property Sale Income credit                    $89,365

 

That Income seems high as it includes my down payment in there.  What am I doing wrong?

 

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