"Asset buyout" - setup as Vendor ???

When one company buys another business via an "Asset Buyout" and receives...

- Inventory

- Goodwill

- Existing Contracts

1 - The only way I can see to treat the 'bought out' company is to set them up as a Vendor.

Right?

2 - Then "buy" the inventory, "buy" the Goodwill and "buy" the contracts ??

Right?

thanks for any comments/suggestions.

Reply to
Will
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Reply to
none

This question has less to do with QuickBooks than it has to do with financial accounting theory. If you buy a group of assets in one transaction, you must allocate the total purchase price to the individual assets. Best example is purchase of realty, for example, a shopping center. At the most basic level, the purchaser must allocate a portion of the acquisition cost to land and part to building. Note that the allocation is very important, because certain assets can be depreciated/amortized, and others cannot. Your situation is no different. You must allocate your purchase price to the Inventory, Goodwill, and Contracts. The allocation should be done based upon relative market value, if it is not set forth on the contract or other sales documents. Once you have determined the asset allocation, all you need to do is debit each asset for its allocated value, and credit cash (or notes payable, or whatever payment method you have utilized). Presumably, you asset allocation will result in valuing the Inventory at cost, which is fine. You will need to allocate overall Inventory to each inventory item, so that you can properly record costs as inventory is sold. Hope this helps.

Reply to
Z Man

Z Man,

Thanks for the note.

My question was really on usage of Quickbooks... The only way I can think of to write checks to entities via Quickbooks is to make them a "Vendor" or an "Employee"...

I just don't tend to think of an organization for which we buy all or most of their "assets" as being a "vendor."

So, I was asking if there were any alternatives to "Vendor" or "Employee" available in QB...

My guess is we will have to set them up as a vendor. Right?

thanks - Will

Reply to
Will

Your other choice is "Other Name". Think of using vendor for anyone that you BUY from and Customer as anyone that you SELL to. It is irrelvant what you are buying or selling. Employee list is pretty straight forward. I would put the other company in as a Vendor or Other name.

Reply to
Laura

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