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Unformatted text preview: spose or sell it) then need to do two things:
1. Calculate the depreciation up until the point of disposal
2. Calculate the gain or loss on disposal
Example: Using the example above: Suppose Cainas decides to use the Straight Line Method of
depreciation for 2009 and then on June 30, 2010, she decides to sell the kitchen equipment for $10,000
and buy new, more energy efficient equipment. What entry would she need to make?
1. Calculate Depreciation until the point of disposal.
Depreciation in 2009 was taken for $6,000, so book value of the asset at 12/31/2009
was $14,000 ($20,000 - $14,000). Need to record depreciation for first 6 months of
2010 (so, $6,000 year x 6/12 = $3,000) Book Depreciation to "catch up" to point of
Depreciation Expense $3,000
Accumulated Depreciation-Equipment $3,000
2. Calculate Gain or Loss on Disposal
Book value at time of disposal was $11,000 ($20,000-$6,000-$3,000). Selling price
was $10,000, so, had loss of $1,000. When recording the entry, need to book the
cash received, the loss, and eliminate both the accumulated depreciation account
and the equipm...
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