Yes, there is an alternate method you might use. It is probably simpler to understand than Solution #1 but requires a lot of self discipline to use, because it depends on you not adjusting the asset values of Items representing fixed assets which were purchased during the current tax year. If you forget and adjust the values of current-year asset purchases (typically, for the purpose of preparing a market value balance sheet) you run the risk of producing incorrect reports of asset purchases for income tax preparation.
So this approach is a bit risky, I provide a general description of it below for two reasons: so that (1) advanced QuickBooks users who think of using this approach on their own will be aware of its potential pitfalls, and (2) if you are aware of the pitfalls and are comfortable with them, you can use this method if you prefer it to Solution #1.
The first step is to enter a Check () for the additional acquisition costs (hauling, in Solution #1's example), but post the expense to a clearing account. (Clearing bank accounts are described in Volume IV and some other volumes of The QuickBooks Farm Accounting Cookbook™ series.)
The second step is to enter an inventory adjustment () to increase the depreciable asset's basis (the Case IH 4430 sprayer Item in Solution #1's example) by the amount of the hauling fee, using the clearing account as the Adjustment Account for the inventory adjustment entry.
Explanation: The Check entry "deposits" the hauling fee to the clearing account, and the inventory adjustment "withdraws" the hauling fee from clearing and adds it to the sprayer Item's value (depreciable basis).
Everything seems simple and easy up to this point, here's the potential "gotcha" you need to know about...
Chapter 11 of Volume IV recommends using a Purchases by Item Detail report () to get a list of the year's fixed asset purchases and trade-ins for income tax preparation. But when you use an inventory adjustment to add acquisition costs to an Item's basis there's a problem: inventory adjustments are not purchases...which means they will be omitted from that report!
Consequently, the Solution #2 approach requires using a different QuickBooks report—an Inventory Valuation Detail Report ()—to gather fixed asset purchase information for income tax purposes.
OK, so what's the "gotcha" then? An Inventory Valuation report includes all inventory adjustments, even adjustments you might make to update an asset's market value for balance sheet purposes. If you make any such adjustments to assets which were purchased during the current tax year, the adjusted values will be shown on Inventory Valuation reports, not the assets' depreciable basis.
For example, let's revisit the sprayer purchase example from Solution #1. At year's end if you wanted to prepare a market value balance sheet you might adjust the sprayer Item's value to $145,000 to reflect its estimated current market value. But if you did, an Inventory Valuation report which you used for income tax preparation would show the sprayer's depreciable basis as $145,000, which is not its actual basis—which is the $150,000 amount calculated in Solution #1. If $145,000 is used as the sprayer's depreciable basis, you will miss out on the tax benefits of $5,000 worth of depreciation ($150,000 - $145,000 = $5,000).
This would be true for all depreciable assets purchased during the tax year. So the if you use the Solution #2 approach, you need to avoid updating the values of Items representing current-year depreciable asset purchases. And the biggest problem with that, is that you must remember to avoid updating those asset's values...which can be very hard to do.
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