Disposal of Assets - Help before my head explodes

[vonnie]

Hi, <BR><BR>I'm looking for some help if anyone out there is still in study mode.<BR><BR>I have been asked a question re diposal of assets. the company has bought a new vehicle and traded in an older one. The disposal has resulted in a loss. I have been asked to record this in a journal and then complete an ETB. What I'm not sure of is 1. Where does the trade-in of the older car go 2. Whwere is the loss shown and how do you account for the disposal of the asset when transferring this to the ETB. I have managed to do the T' accounts fine. But when I go to transfer the info onto the ETB I keep going to write an account for disposals, surely this shouldn't be shown on an ETB. I have looked at this question over and over and I hope someone is able to help.<BR>

[alex]

loss on disposal should be shown in the ETB<BR>I am out of practice but I think it would then go through to the P&L account.<BR><BR>Please feel free to shout if that's wrong, I did DF in December and it feels like such a long time ago!<BR>

[MariaCarla]

Hi,<BR>the loss on disposal should be transferred to the P&L account as an expense and the disposal amount should be deducted from the Fixed Asset - Motor Vehicle A/c<BR>Let me know if I'm wrong anyone!!

[Dazzles]

Hi,<BR><BR>All monetary items should first be posted to the disposal account, this includes depreciation to date & NBV of the asset. The cost of the new asset would also be posted to this account. After all has been posted you will arrive at a profit/loss on disposal.<BR><BR>This resulting amount is then posted as a debit (loss) or credit (profit) to the P&L account on the ETB.<BR><BR>Hope this helps<BR><BR>

[pacman1973]

Easier if there are examples.<BR><BR>Cost of old car, say $10,000. Accmmulated Depreciation to date, $6,000. Cost of new van, say $20,000. Trade in value offered for old car $1,000.<BR><BR>There are 2 issues here. First, to account for Profit/Loss on disposal of old car.<BR>Second, to account for the new van.<BR><BR>Put it simply, NBV of old car is $4000. Agree ? (10K - 6K = 4K).<BR><BR>How much are we getting for this old car ? $1,000 (the trade in value).<BR>So we have a loss of $3000. (4K-1K).<BR><BR>We will also need to pay the balance of $19,000 for the new van.<BR><BR>The accounting entries for Disposal :<BR><BR>1) Transfer cost of old car & accumulated dep to disposal a/c<BR> DR Disposal a/c 10,000 <BR> CR Fixed Asset 10,000<BR><BR>DR Accumulated Dep 6,000 <BR> CR Disposal a/c 6,000<BR><BR>2) Account for the trade in value<BR><BR>DR Fixed Asset (new van) 1,000<BR> CR Disposal a/c 1,000<BR><BR>3) Note that you will have a DR balance of 3,000 (a loss) when you try to balance the disposal a/c.<BR>( 10K - 6K - 1K = 3K).<BR><BR>4) Transfer the loss to the P&L a/c<BR><BR>DR Profit & Loss 3,000<BR> CR Disposal a/c 3,000<BR><BR><BR>After all the above entries are posted, the Disposal a/c will be closed nicely.<BR><BR>4) Finally , the $19,000 cash that we have to pay.<BR><BR>DR Fixed Asset (new van) 19,000<BR> CR Bank 19,000<BR><BR><BR>Note that in your Fixed Account, the balance is now $20,000 which is the cost of the new van.<BR>

[vonnie]

Thanks everyone for their help!! I think I have got there in the end. i wasnt sure if anyone would be still in study mode at this time.<BR><BR>Thanks again.