Fixed Assets Disposal relevant to paper FRA

System

I replied to a thread earlier in the week which has, unfortunately, though understandably, been deleted. I did request that the administrator leave my reply as it would help those studying FRA with aspects concerning disposals of Fixed Assets. Unfortunately, this does not appear possible. I have therefore reproduced my reply as follows:

I cited a circumstance where a company sold a motor vehicle with a NBV of £10,000 (£14k cost, £4k depreciation) for £9,000. The entries to remove the asset from the books would be as follows:

Dr Cash £9,000
Cr P&L sale of assets (income statement)£9,000

Being sales proceeds for the motor vehicle disposed

Cr Motor vehicle cost (B/S) £14,000
Dr P&L sale of assets (income statement) £14,000

Being removal of original cost price of vehicle

Dr Motor vehicle depreciation (B/S) £4,000
Cr P&L sale of assets (income statement) £4,000

Being reversal of depreciation charges

The above entries (in order) have therefore:

(a) recorded the cash proceeds (dr cash cr sale of assets)
(b) removed the original cost of the car (cr fixed assets b/s, dr sale of assets)
(c) removed the depreciation element (dr depreciation b/s cr sale of assets), and
(d) calculated the loss on disposal.

The loss on disposal, which should calculate itself once the above journals have been recorded is calculated as:

Cost price £14,000 less Depreciation £4,000 = £10,000 (NBV stated earlier), less sales proceeds £9,000 = £1,000 loss on disposal, which is a charge to the Income Statement.

Kind regards
Steve

System

Re:Fixed Assets Disposal relevant to paper FRA

Thanks Steve! How is the revision going?

Still can't get my head around fixed assets and disposals :oops: so I am going to print out your post and re-read it slowly. Then it might sink in.

Yours,

Jayne

System

Re:Fixed Assets Disposal relevant to paper FRA

Hi Jayne,

Thankfully my student days are over so no more exams for me - though I do know exactly what you lot are going through.

Fixed asset disposals can be a pain. The best thing to do is to first think about what the entries are to remove the NBV from the balance sheet. You have to remove the original cost (dr sale of assets in the P&L and credit the cost in the balance sheet), then remove the depreciation charges (dr depreciation in the balance sheet and cr sale of assets in the P&L). Think of it as the motor vehicle net book value is £10k. The component parts are £14k cost less £4k depreciation. We have to remove this from the balance sheet, hence credit cost, debit depreciation, the balance going to the sale of assets.

The proceeds are debit cash, credit sale of assets. Therefore sale of assets are made up of Cost, less depreciation, less sales proceeds = loss or profit.

Keep at it, you will get there in the end.

Regards
Steve

System

Re:Fixed Assets Disposal relevant to paper FRA

Hi Steve,

Are you any good at journals?

I am getting stuck on some.

Please help!

Yours,

Jayne

System

Re:Fixed Assets Disposal relevant to paper FRA

Jayne,

Which journals are you struggling on?

Regards
Steve

System

Re:Fixed Assets Disposal relevant to paper FRA

8) Zzzz...

Neutral Zone - will avoid...

Use your time wisely, Jayne...

Yes, I am...

MODERATOR - Feel free to count this one, as well...

System

Re:Fixed Assets Disposal relevant to paper FRA

Hi Nigel,

Just you wait until June when you are tearing your hair out over disposals and part exchanges. There is plenty of other complicated stuff in FRA as well. :roll:

How is PLB revision going? Are you doing the NVQ or the Diploma pathway?

Are you a Cancerian??? :oops:

Yours,

Jayne

System

Re:Fixed Assets Disposal relevant to paper FRA

what are the relevant journals required when you part ex a company car
cheers