It's likely that you dispose of assets every year. Waiting until year end to adjust the gain-loss on disposals could skew your financials significantly.
So why wait?! Act now and download the template!
The spreadsheet is broken down into three parts:
Note: Debits are represented as positive numbers and credits are represented as negative numbers.
1) Asset Information:
Here, you will input data associated with the asset disposed of, such as the description, category (drop-down list provided), historical cost, accumulated depreciation at time of sale, and either cash or trade-in proceeds. The formula will take care of the rest.
In our example below, we're disposing of a 2015 Ford F-150. With total cash proceeds of $10,000 and a net book value of $3,000, we have a total gain of $7,000.
2) Receipt of Proceeds:
This section covers the entries to record the proceeds and disposal of the vehicle. I have separated these entries out for illustration purposes, although you are not required to do so. The journal entries should auto-populate.
a) Record all proceeds to the (Gain)/Loss on Disposals account.
b) Record entry to remove asset cost and accumulated depreciation, with an
adjustment to (Gain)/Loss on Disposals to reflect the total gain of $7,000.
c) There's a good ole fashioned T-Account for the gain and loss that shows you the
impact of your entries on the (Gain)/Loss on Disposals account.
3) Note: (Gain)/Loss on Trade-Ins
So you traded in your old truck for a new one. Although you didn't see the cash for the allowance, you still technically received proceeds. This will trigger an entry to record a (Gain)/Loss on the trade in.
In our example below, we trade in a vehicle with a historical cost of $25,000 and accumulated depreciation of $22,000 at the time of the trade in. The dealership gave us a $7,000 trade in allowance when we purchased a new vehicle for $20,000. Since the dealership gave us more money than the net book value, we have a gain, $4,000. You'll notice that the total cost of the vehicle includes the trade in amount and the difference that was financed or paid in cash.
It's always a great idea to have a second pair of eyes review your work, so please have your calculations and entries checked before posting them.
As always, feel free to reach out with any questions. Thanks!