I have a package delivery service where I was running 4 trucks, but have downsized to just my truck. Two of the trucks were sold to the employees who drove them and the agreement was they would just take over the payments plus pay me a sum for the route. I need some direction on how to account for this. I made 2 GL accounts - A/R - (Former Employee Name) and transferred the amount that was owed on each of the trucks from the Asset Account Trucks/Trailers to the A/R accounts. I then posted a Journal Entry debiting the amount they agreed to pay for the route to those A/R accounts and crediting Other Income, as the route was never listed as an asset on my books. One of the former employees defaulted on the loan and I had to take the truck back and have since sold it and paid off the loan. What do I do with the monies I had collected from him up until the time he defaulted?
Thank you in advance for any direction you can provide...
Your question being more in the realm of accounting than taxation, I will suggest posting your question in the QuickBooks Community.
seek professional help. the sale of the route is separate and apart from the sale of the trucks. sale of the routes are probably reportable as capital gains. but if you haven't been paid in full for the one route, installment reporting is possible. however, installment payments for the routes may require imputed interest calculations.
What you have here is not an installment "loan". It is an installment "sale". Actually two sales. One for the sale of the vehicle and the other for the sale of the route. But what I can tell you based on what I've seen happen with installment sales of any type or kind over the last 10 years is this; Keep every single shred of paperwork related to the sales. Changes are more than 90% the buyer will default on payments within the first two years and you'll have to take legal action to legally "repossess" the vehicles/routes. Chances of the buyer defaulting in the next five years is 100%. In my own observations over the last 10 years, I've never seen an installment sale (sale by owner) last more than 5 years without the buyer defaulting.