Question
When an item of property, plant, and equipment is disposed of, then the gain or loss on disposal is computed as the difference between the
When an item of property, plant, and equipment is disposed of, then the gain or loss on disposal is computed as the difference between the consideration received and the asset's net book value. example: a company sold for $6,000 machinery that originally cost $20,000, Depreciation of $12,000 had been recorded up to the date of sale.
Gain/Loss on disposal = Consideration received - Net book value of the asset = $6,000 - ( $20,000 - 12,000) = ($2,000)
so there will be loss of $2,000
To add, book value is the historical cost of the asset less the accumulated depreciation.
Question: How would the gain or loss be calculated if the company retires the asset or disposes of the asset without receive and any consideration?
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