Investment account

Scenario is: My partnership bought property w/ existing business. Property consist of a house, land, furniture & fixtures to run the business, including the existing clients. Property will be used 100% for the business,
we will get my own business permit & licenses. Cost of property bought is $800K, $700K was financed, we put in $100K as down payment. Business has a guaranteed gross income of at least $20K a month.
Now here's the scenario that is confusing me. Previous owner & we went into agreement that we will pay him extra $50K for the business he lost. It is payable in 12 months. We am using Cash basis of accounting method.
Questions: 1. How would I account the $50k when I set-up my book? Is it long-term liability? Organization cost? or Start-up cost? Will it reduce our beginning capital or equity? Should it become part of rhe property's purchase cost? Please give me the debit/credit entry. 2. How would I account the monthly payment for the $50K. Is it an expense against the long-term liability? Decrease in Asset if it is going to be part of purchase cost? 2. At the end of the year, lets say 6 months after. Out of $50K, we already paid $25K and we still owe $25K. And its time to file the partnerships tax return. Where is my amortization cost will be based? On the $50K or on the $25K? Can I just expensed the $25K and amortized $25K and just recapture the expensed amount on next years Income Tax?
This is really confusing. Pleas help me understand what is going on in our balance sheet & income statement.
Thanks, Jeanette
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

Huh? Why are you doing this exactly?
There needs to be a little more detail on this to help determine what you are paying for, as that determines the accounting of that transaction.
What business does the seller think he's losing, and why does he think you should be paying him for that ~~~IN ADDITION TO THE PURCHASE PRICE.
Are you just collecting his A/R? Is this a "non-compete" payment? Why on Earth would you agree to pay $50,000 more than the business was worth?
What do ~YOU~ get for that $50,000 you are paying?
--
Paul Thomas, CPA
snipped-for-privacy@bellsouth.net
  Click to see the full signature.
Add pictures here
<% if( /^image/.test(type) ){ %>
<% } %>
<%-name%>
Add image file
Upload

BeanSmart.com is a site by and for consumers of financial services and advice. We are not affiliated with any of the banks, financial services or software manufacturers discussed here. All logos and trade names are the property of their respective owners.

Tax and financial advice you come across on this site is freely given by your peers and professionals on their own time and out of the kindness of their hearts. We can guarantee neither accuracy of such advice nor its applicability for your situation. Simply put, you are fully responsible for the results of using information from this site in real life situations.