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Just discovered coded vehicle as a lease when it should have been a purchase from 2012 how should this be corrected?

We now want to sell it, but it has been expensed from 2012 to 2014.

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Hmmm. . How did you record the use of cash when you acquired the truck?

zelda yuda
Title: bookkeeper
Company: fm2,inc
(bookkeeper, fm2,inc) |

Cash was debited, vehicle expense was credited. Initially it was to be leased, then the owner changed it to a purchase, but the records were not updated to reflect the change.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

So how did you book the cash when you changed from lease to purchase?

zelda yuda
Title: bookkeeper
Company: fm2,inc
(bookkeeper, fm2,inc) |

The records were not changed when the title was received so right now there is no asset on the books to sell.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

There is something that doesn't sound just right. If you bought a car for $20K and put $3K down and make monthly payments of $300, you should have had an asset on the books for at least $17K.

So you didn't capitalize the lease and put the $3K and payment to auto lease, I understand that. But when you purchased the car and paid $19K for example, what entry was made? $19K went out of your bank account - how did you book the entry?

If you expensed the $19K, then you may be keeping your books on the tax basis. I would talk with your tax preparer, because whatever you got for the vehicle is now 100% income.

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