Finance Questions? Ask a Financial Expert for Answers ASAP
To record this transaction, you would debit accounts payable and credit income
you would do nothing for the cost of the inventory purchased but not paid for -it would remain in inventory at cost
why would this not be credited to paid in capital as the vendor's portion of the investment
yes, that is correct if they have ownership interest that is what would happen
Then the inventory would remain at the original cost and if the item was sold to a customer below the value as originally recorded, then a loss would be incurred?
Is there any way to prevent showing a loss?
You would prevent showing a loss by selling the inventory above cost
Even if you de-valued the inventory, you would still show a loss
That made me laugh. I thought that was how it would have to be, but wanted a second opinion before presenting this.
Thank you for your help.
You're welcome. Glad I could give you a laugh :-)
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One more thing.
At year end, this investment would be viewed as any other investor in the LLC who actually paid cash, correct. Meaning whatever value this reduction in debt had, would define the vendor's portion of income.
ok, thanks. I appreciate your time.