1. Accounting for Plant Assets and Depreciation
Chapter 18, Section 4
Disposing of Plant Assets

2. Depreciation Review
What information is needed to calculate depreciation expense?
Original Cost
Estimated Salvage Value
Estimated Years of Useful Life
How do you calculate annual depreciation?
(Original Cost – Salvage Value) ÷ Years of Useful Life
How do you calculate monthly depreciation?
Annual Depreciation ÷ 12 = Monthly Depreciation
When would you need to know the monthly depreciation amount?
When the asset is purchased or sold after January 15.

3. Disposing of a Plant Asset
When an asset is no longer useful to the business (obsolete or worn out), it is disposed of.
May be sold, traded, or discarded.
If disposed of after January 15, additional depreciation expense must be recorded for that year.
Count how many months the asset was used then multiply by monthly depreciation rate.
Record in Section 3 of Plant Asset Record
Record in General Journal using Memo No.

4. Recording a Plant Asset's Depreciation Expense for a Partial Year
April 4, 20X7. Recorded a partial year’s depreciation on a safe to be sold, $ Memorandum No. 31. 1 2 3
1. Debit the depreciation expense account.
2. Credit the accumulated depreciation account.
3. Update Section 3 of the plant asset record.

5. Disposing of a Plant Asset (cont.)
Determine Ending Book Value
Journal entry to record disposal must do the following:
Remove original cost from the equipment account
Remove accumulated depreciation from the Accumulated Depreciation account
Recognize any cash received
Recognize a gain or loss on the disposal (based on ending book value)

6. Sale of a Plant Asset for Book Value
Lesson 21-4
Sale of a Plant Asset for Book Value
January 6, 20X6. Received cash from sale of display case, $250.00: original cost, $3,250.00; total accumulated depreciation through December 31, 20X5, $3, Receipt No. 4. 1 2
1. Record an entry in the cash receipts journal to remove the original cost.
2. Check the type of disposal, and write the date, and disposal amount in Section 2 of the plant asset record.

7. Sale of a Plant Asset for More than Book Value
April 4, 20X7. Received cash from sale of safe, $425.00: original cost, $1,800.00; accumulated depreciation through April 4, 20X7, $1, Receipt No. 47. 1
1. Remove the original cost. Record the gain on the sale. Record the cash received from the sale. 2
2. Check the type of disposal. Write the date and disposal amount in Section 2 of the plant asset record.

8. Sale of a Plant Asset for Less than Book Value
October 6, 20X7. Received cash from sale of a computer, $150.00: original cost, $1,900.00; total accumulated depreciation through October 1, 20X7, $1, Receipt No. 281. 1 2
1. Remove the original cost. Record the loss on the sale. Record the cash received from the sale.
2. Check the type of disposal and write the date and disposal amount in Section 2.

9. PROBLEMS Work Together 18-4 (text pg. 550)
On Your Own 18-4 (text pg. 550)
Application Problem 18-5 (text pg. 557)