Entering Mortgage Closing Costs for Depreciation

Tim7621 tim7621 at aol.com
Wed Nov 27 11:34:14 EST 2013


Hello,

I have created a GnuCash account for a commercial rental property held in a
LLC.
Here are the numbers (rounded for simplicity):
The building purchase price: $163,000. 
Loan amount: $136,500
Money brought to closing: $34,000(26,500 down payment, 500 prop. taxes,
7,000 closing cost [that must be added to the basis and amortized])

Under Equity, I created an account to show money brought to closing
($34,000)
Under Assets, I created an account 'Building' to show building value -
$163,000
Under Liabilities, I created an account to show the loan amount - $136,500

My questions:
1. Where do I enter the closing costs (presently, I have it shown under
Liabilities, in an account to show the closing costs - $7,000, but I'm not
sure if this is correct)

Next question is concerning depreciation:
I found the following example of how to depreciate office equipment:

/You bought a computer with a high speed processor, extra memory, and disk
space, for
$3000, to serve as your small business server. Let us walk through how you
will account
for the purchase of the capital asset initi ally and how you will account
for the depreciati on
expense each month:
1. Create a new account called Offi ce Equipment with Account Type as Asset
and
Parent Account as Assets.
2. On the date of purchase make an entry showing an Increase of $3000 in the
Offi ce
Equipment account and select the Checking Account in the Transfer column.
3. We are going to apply a straight-line method of $50 depreciati on per
month over
the 60 month period. This is just an example. More details follow in this
secti on
about what depreciati on rates are allowed by tax laws. On the last day of
the month,
create a transacti on in the Expenses:Depreciati on account showing an
expense of
$50 and select the Offi ce Equipment account as the Transfer account/

My issue with depreciating the building is my depreciation schedule isn't
based on the total asset value ($163,000). I can only depreciate the
building value $146,700 (value of building minus land) plus the closing
costs $7,000, for a total of $153,700. 
 
2. How do I show reconcile this difference?

Thanks,

Tim







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