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Discussion Forum Index --> Accounting Questions --> Asset Acquisition of a Business
Chase (talk|edits) said:
| 4 January 2007
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| In an asset acquisition of a business for a total purchase price of $50K, how do you account for the other closing costs on the F/S? The buyer actually paid close to $60K after it was all said and done for the fees, some property taxes, etc? How should this be reflected on the F/S? I booked the $50K for the purchase a stock in the S Corp with the debits going to the related assets purchased but was not sure about the other $10K. THANKS!
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Deback (talk|edits) said:
| January 4, 2007
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| I would prorate (debit) the cost of the fees to the related assets and credit the $10K fees to the stock.
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AKaccountess (talk|edits) said:
| 5 February 2007
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| Chase you said you had an assest acquisiton. Who bought the assets the individual shareholder or a business? The fees that couldn't be expensed as ordinary business expenses, Are included in the basis of the assets purchased or can be closing costs or loan fees ie: intangible assets that would be amortized over 15 years. If the other costs are set up costs and under $5,000 they are expensable for tax purposes but still need to be capitalized for book purposes. Expenses such a property taxes whether real or personal are expensed in the period they are paid (cash basis) or due (if accrual basis)), If the business purchased the assets then there would be a debit to assets, intangibles & expenses for property taxes and credit to cash/liabilities. If the shareholder purchased the assets, then the entry would debit assets credit stock/APIC or note payable shareholder. IF this is a corporate enity being set up. Make sure you follow the break down disclosed in the form filed with the IRS on substantial sale of a business or assets (Cant' remember off the top of my head the form number 5123???) This form is to be included in the returns of both the seller and the buyer.
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