how to record business purchase
We purchased an auto repair business by refinancing our home. The total purchase price exceeded the value of the equipment & supplies that were sold with the business, so there is some goodwill. However, we did not acquire receivables or much of a customer base, as we are starting over establishing our new name with this business. We did not acquire the building either. We are a sole proprietorship. I have a few questions:1.) To record the business purchase: Since we incurred a personal loan (through our home equity) to buy this business, should it be recorded as "owner investment" or as a liability? My husband argues that we have no equity because we have financed the funds for the business purchase, and so it makes sense to record it as a liability to correctly reflect our net worth.2.) We have established a threshold of $500 to be considered a capital expenditure. Most of the equipment that was purchased with the business is old and outdated, and most equipment pieces would individually sell for less than this amount ($500). However, the equipment is still being used in the business (i.e., chemical storage tank now worth about $300 because of its age). The office desks and misc. furniture is only worth about $100. Should the office furniture and equipment be listed as fixed assets and depreciated assuming a zero salvage value, since their cost is less than the threshold because they are so old? Here is my entry to record the business purchase:(debit)machinery & equipment (debit)furniture & fixtures(debit)shop supplies(debit)goodwill (credit)owner investment or liability/note payable?I appreciate your help!Susan
