1. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 18-4 Disposing of Plant Assets

2. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Sale of a Plant Asset for Book Value When a plant asset is no longer useful to a business, the asset may be disposed of. The amount of gain or loss, if any, is calculated by subtracting the book value from the cash received 2 LESSON 18-4

3. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 3 LESSON 18-4 SALE OF A PLANT ASSET FOR BOOK VALUE 1.Record an entry in the cash receipts journal to remove the original cost. page 546 January 6, 20X6. Received cash from sale of display case, $250.00: original cost, $3,250.00; total accumulated depreciation through December 31, 20X5, $3,000.00. Receipt No. 4. 2.Check the type of disposal, and write the date, and disposal amount in Section 2 of the plant asset record. 1 2

4. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Recording a Plant Asset’s Depreciation Expense for a Partial Year The method to calculate a partial year’s depreciation is the same as calculating despeciation when an asset is purchased during the fiscal year. 4 LESSON 18-4 Annual Depreciation Expense Months in a YearMonthly Depreciation Expense $240 /12 =$20 Monthly Depreciation Expense Number of Months Asset is used Partial Year’s Depreciation Expense $20 x3 =$60

5. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 5 LESSON 18-4 RECORDING A PLANT ASSET’S DEPRECIATION EXPENSE FOR A PARTIAL YEAR page 547 April 4, 20X7. Recorded a partial year’s depreciation on a safe to be sold, $60.00. Memorandum No. 31. 1.Debit the depreciation expense account. 2.Credit the accumulated depreciation account. 3.Update Section 3 of the plant asset record. 1 2 3

6. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Sale of a Plant Asset for More than Book Value Gain on Plant Asset- revenue that results when a plant asset is sold for more than book value A gain is recorded as “other revenue” 6 LESSON 18-4

7. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7 LESSON 18-4 SALE OF A PLANT ASSET FOR MORE THAN BOOK VALUE 1.Remove the original cost. Record the gain on the sale. Record the cash received from the sale. page 548 April 4, 20X7. Received cash from sale of safe, $425.00: original cost, $1,800.00; accumulated depreciation through April 4, 20X7, $1,500.00. Receipt No. 47. 2.Check the type of disposal. Write the date and disposal amount in Section 2 of the plant asset record. 1 2

8. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Sale of a Plant Asset for Less than Book Value Loss on Plant Assets- the loss that results when a plant asset is sold for less than book value. Recorded as “other expenses” 8 LESSON 18-4

9. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 LESSON 18-4 1.Remove the original cost. Record the loss on the sale. Record the cash received from the sale. SALE OF A PLANT ASSET FOR LESS THAN BOOK VALUE 1 page 549 October 6, 20X7. Received cash from sale of a computer, $150.00: original cost, $1,900.00; total accumulated depreciation through October 1, 20X7, $1,500.00. Receipt No. 281. 2.Check the type of disposal and write the date and disposal amount in Section 2. 2

10. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 10 LESSON 18-4 TERMS REVIEW gain on plant assets loss on plant assets page 550