if a plant asset is retired and is fully depreciated This is a topic that many people are looking for. star-trek-voyager.net is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, star-trek-voyager.net would like to introduce to you Disposal of Plant Assets by Exchange. Following along are instructions in the video below:
“Plant assets nneed to be replaced the most common nreasons are that they wear out out or become obsolete nor just become too costly to continue to repair. Generally there three ways nto dispose of plant assets. The first is just scrap nor retire an asset. The second is to sell an asset.
The third is to ntrade or exchange an old asset for a new one this video will focus non the accounting for exchange of asset. But please note that nthis is a very simplified overview of this topic at an naccounting principles level in reality accounting for nexchanges in plant assets is far more ncomplicated than what i m going to demonstrate here when we exchange nplant assets. There are a few steps we need nto do in order to make the proper journal entry. The first step is to record ndepreciation expense as of the scrap date.
It is unlikely that accumulated ndepreciation account has the correct balance already next. We need to remove the nasset from our balance sheet. We do this by zeroing out the nplant asset and accumulated depreciation account additionally. We need to nrecord the new asset as well as any cash paid nin.
The transaction finally we need to record nany. Gain or loss related to the exchange of assets. Let me go over a few nof. The rules.
That guide us in recording njournal entries for the exchange of assets to begin with they are commonly ncalled non monetary exchanges the basis for the amounts nrecorded in the transaction is fair market values assets are recorded nat their costs. And the cost of a new nplant asset. Received is equal to the fair value nof. The old asset given up plus any cash paid finally gains or nlosses occur when the fair value of nwhat.
We give up is different than the book nvalue of the assets. Given up let s look at an. Example charlatans uk. Trades an old ndelivery truck and 40000 cash on june.
30. 2018. Nfor a new truck that has a sticker price of. 50000 the old truck s original ncost was.
40000 and it is worth. N. 8000. On june.
30 as of june. 30 the total amount nof accumulated depreciation was 30000. So what is the fair value. Nof the assets given up well we.
Paid cash. Nof 40000 plus traded an old truck. Worth. N.
8000 for a total of 48000. This becomes the cost nof. The new truck. So now let s record.
The journal nentry to exchange these assets on june 30. I think the simplest way to nrecord disposal of assets. Journal entries is to nstart with the accounts and amounts you know in this. Case we nneed to debit truck that s the new truck for 48000.
We calculated this amount njust two slides earlier also we need to debit naccumulated depreciation and the balance is 30000. This will remove accumulated ndepreciation from our books. We also need to ncredit the truck and that s the old truck and its balance is 40000. This will remove the old ntruck from our.
Books we also need to credit ncash for 40000. As this is the amount we npaid for the new truck. So you can see this journal nentry doesn t balance we need a debit for n 2000 to make it balance so i am missing a debit namount for 2000 in this case we nincurred a loss of 2000 when exchanging assets losses are like expenses ” ..
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