Activation Exercise 10-4: Sale of Fixed Assets

Terms and Definitions

A fixed asset may be sold before or after the asset is fully depreciated. If the selling price of a fixed asset is more than the asset's book value, a is recorded. Any gain or loss on the sale of a fixed asset is recognized on the in the period in which the asset is sold.

Understanding the Business Transaction

A fixed asset is sold when a company .

Coburn Company purchases equipment on January 1, 20x1 with the following information:

Initial cost		$134,800
Expected useful life		10
Estimated residual value		2,400
Depreciation Method		Straight Line

On January 1, 20x4, Coburn sells the equipment for cash of $102,839. Calculate the following information related to Coburn's equipment on the date of sale.

Annual Depreciation Expense	$
Age (number of years depreciated)
Accumulated Depreciation	$
Book Value on Date of Sale	$
Gain (Loss) on Sale	$

Recording in the Accounting System

Prepare the journal entry to record the sale of the equipment by Coburn on January 1, 20x4:

If an amount box does not require an entry, leave it blank.

1/1/x4

Financial Statement Impact

Bradshaw Company purchases equipment on January 1, 20x1. The following information relates to this equipment:

Initial cost	$200,000
Expected useful life	5
Estimated residual value	25,000
Depreciation Method	Straight Line

Bradshaw sells the asset for cash. Click here and use the sliders to select the asset's age and selling price to answer the following questions.

1.	What is the gain (loss) on sale if the asset is sold on December 31, 20x2 for $140,000?
	$

2.	What is the gain (loss) on sale, if the asset is sold on December 31, 20x4 for $80,000?
	$

3.	If the age of the equipment remains the same and the selling price increases, the amount of any gain will , or the amount of any loss will .

4.	If the selling price remains the same, and the age of the equipment increases, the amount of any gain will , or the amount of any loss will .