Plant Asset Essay

Disposal of Plant Assets 1. Discard Plant Assets 2. Sell Plant Assets 3. Exchange Plant Assets – Exchange with similar assets – Exchange with dissimilar assets Discard Assets A machine costing $9000 with accumulated depreciation of $9000 is discarded on June 5, 2001 Machine 9000 Accumulated depreciation 9000 Accumulated depreciation needs reverse entry General Journal Date Account Title and Explanation PR Debit Credit Discard Assets A machine costing $8000 with accumulated depreciation of $6000 on Dec 31, 2000. It is discarded on July 1, 2001 Machine 8000 Accumulated depreciation 000 General Journal Date Account Title and Explanation PR Debit Credit Selling Plant Asset 3 Types of Selling – Sell at book value – Sell above book value – Sell below book value Sell Plant Asset at Book Value Example A machine costing $16000 with accumulated depreciation of $12000 on Dec 31, 2002. It is sold on March 1, 2003 for cash = $3000 Machine Accumulated depreciatio n 16000 12000 General Journal Date Account Title and Explanation PR Debit Credit Sell Plant Asset Above Book Value Example A machine costing $16000 with accumulated depreciation of $12000 on Dec 31, 2002. It is sold on March 1, 2003 for cash = $7000 Machine Accumulated depreciation 16000 12000 General Journal Date Account Title and Explanation PR Debit Credit Sell Plant Asset below Book Value Example A machine costing $16000 with accumulated depreciation of $12000 on Dec 31, 2002. It is sold on March 1, 2003 for cash = $2500 Machine Accumulated depreciation 16000 12000 General Journal Date Account Title and Explanation PR Debit Credit Exchanging Plant Assets Assets Exchange Dissimilar Similar Loss Recognized Recognized Gain Recognized Not Recognized Exchange Similar Asset – Gain Example An old equipment costing $36,000 with accumulated depreciation of $20,000 on Dec 31, 2002. It is exchanged on Jan 1, 2003 for new equipment that has fair value =$42,000 by paying more cash = $33000 Machine Accumulated depreciation 36,000 20,000 General Journal Date Account Title and Explanation PR Debit Credit Exchange Dissimilar Asset – Gain Example An old equipment costing $36,000 with accumulated depreciation of $20,000 on Dec 31, 2002. It is exchanged on Jan 1, 2003 for new equipment that has fair value =$52,000 by paying more cash = $33000 Machine Accumulated depreciation 6,000 20,000 General Journal Date Account Title and Explanation PR Debit Credit Summary ? ? ? ? ? ? ? Cost of plant assets Lump sum purchase Capital expenditure and Revenue expenditure Depreciation method Partial year Depreciation Revise estimate of salvage value and useful life Disposal of plant assets Practice On July 14, 99 company A paid $600,000 cash to acquire a factory that has land, land improvement building and machinery. Appraised value: ? land = $160,000 ? land improvement = $80,000 ? Building = $320,000 ? Machinery = $240,000 Journalize?