Idea, in my experience, in an asset purchase the current assets except for cash, long-term assets, and current liabilities are assumed and recorded. Long-term liabilities are generally the responsibility of the seller, often paid off at the time of sale so that liens can be released and the underlying collateral transferred to the buyer. In the asset purchase agreement, there could be exceptions that would override the normal accounting. For instance, certain fixed assets may be personal in nature and therefore not included in the sale.
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Charles Langenhop CMA, CPA
Chief Financial Officer
Plano TX
United States
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Original Message:
Sent: 12-09-2023 06:48 PM
From: Ida Williams
Subject: Purchase Acquisition and Book Entry
Hi,
I have a client who purchased a company at the start of 2023. It was an asset-only purchase, so the liabilities of the previous company were not transferred over. However, the previous bookkeeper recorded the asset purchase AND the liabilities to clear the books as a "goodwill" transaction. Again, the liabilities should not have been recorded, and the new company was starting at a zero balance. Can anyone share how to correct, and/or, what should have taken place at the time of acquisition?