Disposal of Property, Plant, and Equipment

A. Computing Gain or Loss

Cost of Asset 40,000 Accumulated Depreciation 26,000 -------- Book value 14,000 Compare Book Value to Proceeds Proceeds 16,000 ------- Difference 2,000 * * Gain if Proceeds > Book Value Loss if Book Value > Proceeds

B. Journal Entry for Disposal

  1. Debit cash (or other asset) for the value received on the asset. None if just discarding the asset.
  2. Debit accumulated depreciation for the amount of the balance for the asset being disposed of.
  3. Credit the asset account for the amount of its cost.
  4. Credit or debit "Gain (Loss) on Disposal" respectively, for the difference between the book value of the asset and the proceeds received.
    1. Debit Credit ------- -------- (1) Cash 16,000 (2) Accumulated depreciation 26,000 (3) Gain on Disposal 2,000 (4) Asset 40,000