Discussion:Acquisition question

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Discussion Forum Index --> Accounting Questions --> Acquisition question

Jadkinson22 (talk|edits) said:

16 April 2013
I have a client that just purchased a nursing home and I am not really familiar with this industry. The purchase goes as follows:

Purchase price was 3,523,122 (includes loan costs)which I will allocate over the fixed assets purchased. They assumed $896K liabiilty of Lease Life Deposits (patient deposits) and borrowed $2,625,000 of LT Debt. What would the opening entries be:

Assets purchased $3,523,122
Patient Deposits $896,093
LT-Debt 2,625,000
APIC???????? 2,029

What would the balance of $2,029 be for? Paid-In-Capital?

Also, the patient deposits are non-refundable....how do I recognize as income? What life do I recognize this over? I cannot find any guidance on this Lease Life Deposit issue anywhere. I am a newby here and thank everyone in advance for the assistance.

Mr cheese (talk|edits) said:

5 May 2013
What was the $2,029? Your numbers should balance so you may want to know where that surplus amount comes from before you record it in APIC.

Kevinh5 (talk|edits) said:

5 May 2013
Why allocate over only the fixed assets?

There are no intangible assets?

Evlcpa (talk|edits) said:

4 October 2013
Generally adding to equity for an acquisition is not allowed. The entry should balance with assets and liabilities. I think you have your Patient Deposits as a debit and it should be a credit because they are "customer deposits" for future services to be provided by the company.

Mr cheese (talk|edits) said:

12 October 2013
Evlcpa, the op did credit "Patient Deposits" to an "Unearned Revenue" (current liability) account. Although op didn't directly specify what category of account the Patient Deposits was, the math confirms...

Assets Purchased (3,523,122) = Patient Deposits (896,093) + LT-Debt (2,625,000)+ Mystery plug? (2,029)...??????

There must be some kind of amortizable loan fee or other type of charge somewhere that was missed. That's my best educated guess.

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