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. 
      5. 

                                              Debit       Credit
                                             -------     --------

          (1)   Cash                          16,000
          (2)   Accumulated depreciation      26,000
          (3)       Gain on Disposal                       2,000
          (4)       Asset                                 40,000