1. Long-Term Assets: Plant Assets and Intangibles
Chapter 9 Part 2 1 1

2. Calculate and record the disposal of plant assets
Objective 4
Calculate and record the disposal of plant assets

3. Disposing of a Plant Asset
Sell
Exchange
Discard

4. Disposing of a Plant Asset
Bring depreciation up to date
Compare assets received with book value of asset being disposed of to determine if there is a gain or loss
Gain increases net income – credit balance
Loss decreases net income – debit balance
Record entry to remove asset from books

5. E9-21 Depreciation for 2007: $10,000 / 5 = $2,000
Depreciation for 2008 (through Sept 30)
($10,000 / 5) x 9/12 = $1,500
Accumulated Depreciation
2,000
1,500
3,500 balance

6. E9-21 Book Value of Fixtures: Cost $10,000
Accumulated Depreciation 3,500 $6,500
Cash Received (5,000)
Loss on sale of fixtures $1,500

7. E9-21 Sep 30 Depreciation Expense 1,500 Accumulated Depreciation 1,500
GENERAL JOURNAL
DATE
DESCRIPTION
REF
DEBIT
CREDIT
Sep 30 Depreciation Expense 1,500
Accumulated Depreciation 1,500
30 Cash 5,000
Accumulated Depreciation 3,500
Loss on Sale of Fixtures 1,500
Fixtures 10,000

8. Exchanging Plant Assets
Market value
of new asset
Book value of
old asset +
cash given
>
“Cost” of the new asset =
The most common type of exchange transaction is when a company trades in an asset for a similar, new asset. In these trades, gains are not recognized because the business still owns the same type of asset that it owned before the trade.

9. Exchanging Plant Assets
Market value
of new asset
Book value of
old asset +
cash given
<
“Cost” of the new asset =
Recognize a loss for the difference

10. E9-23
Depreciation Rate:
($350,000 - $100,000) / 1,000,000 miles = $0.25 per mile
Depreciation Expense:
2006: $0.25 x 80,000 miles = $20,000
2007: $0.25 x 120,000 miles = 30,000
2008: $0.25 x 160,000 miles = 40,000
2009: $0.25 x 40,000 miles = 10,000
Total accumulated depreciation $100,000

11. E9-23 Book value of old truck: Cost $350,000
Accumulated depreciation (100,000)
$250,000
Cash paid 50,000
Cost of new truck $300,000