Three years back, Mr. Az bought a property from Mr. Za for $100,000 under a term. Today, after the depreciation property's book value is $70,000. Now, Mr. Za asking $200,000 more to give the title of the property to Mr. Az, and Mr. Az is bond to pay this amount under the term he signed three years back. So, Mr. Az took a loan of $200,000 from a bank and paid Mr. Za off.
What entries should I make for these whole transaction?
To correctly record these transactions, you would need to make the following journal entries:
1. Initial Purchase of the Property:
Debit: Property (asset) - $100,000
Credit: Cash (asset) - $100,000
2. Depreciation of the Property:
Debit: Depreciation Expense (expense) - $30,000
Credit: Accumulated Depreciation (contra-asset) - $30,000
3. Additional Payment to Mr. Za:
Debit: Property (asset) - $200,000
Credit: Cash (asset) - $200,000
4. Loan Taken from the Bank:
Debit: Cash (asset) - $200,000
Credit: Loan Payable (liability) - $200,000
Please note that these journal entries are based on the assumption that the property is a long-term asset subject to depreciation, and the depreciation expense is recognized annually over the asset's useful life. Additionally, it is assumed that the loan taken from the bank is a long-term liability. As accounting practices might vary, it is recommended to consult with a professional accountant or refer to your organization's accounting policies to ensure accurate recording of transactions.