Where is downpayment for land purchase shown on balance sheet?

by Glenna J
(Pearland, Tx, USA)

(a church) We purchased land for $850,000 after paying $15,000 down. At closing, we paid the seller $193,000 and financed the balance with a bank. I know the loan of $637,000 is recorded as Note payable (liability), cash of the initial $15,000 and then the $193,000 were expensed. I can't figure out - do I record the asset as the total purchase price at $850,000? Does the $208,000 expense get a 4 sided entry to record it as part of the asset account? Confused. Thanks for any guidance.


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Hi Glenna!

Congratulations on your purchase!

The purchase of land is an asset. If exchange for this asset, you gave cash and a Note Payable.

Here's how I see the entry:

Land (increase to asset).....$850,000

Cash in Checking (decrease to asset)........$208,000

Note Payable-Land (increase to Liability)....$642,000


The land is posted at the total cost. I calculated the loan amount as $850,000 minus $15,000 minus $193,000, which equals $642,000.

Land is non-depreciable, so it will stay on the books at its cost.

If you have any other questions, just let me know. Glad to help!

Kathy

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