Multiple Choice
A retirement or abandonment of an asset is different from a sale of an asset because:
8. Long Lived Assets
Retirement of Plant Assets (No Proceeds)
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
A company using the double-declining-balance method for recording depreciation has a fully depreciated asset with a salvage value of $8,000. The asset originally cost the company $62,000. If the company retires the asset in the current year for no proceeds, the journal entry to record the disposal would include:
A
A debit to Accumulated Depreciation for $62,000
B
A debit to Depreciation Expense for $8,000
C
A credit to Equipment for $8,000
D
None of the above
Verified step by step guidance1
Identify the original cost of the asset, which is $62,000, and the salvage value, which is $8,000.
Since the asset is fully depreciated, the accumulated depreciation should equal the original cost minus the salvage value, which is $62,000 - $8,000 = $54,000.
When the asset is retired with no proceeds, the journal entry should remove the asset and its accumulated depreciation from the books.
The journal entry should include a debit to Accumulated Depreciation for $54,000 to remove the accumulated depreciation.
The journal entry should also include a credit to Equipment for $62,000 to remove the asset's cost and a debit to Loss on Disposal of Asset for $8,000 to account for the difference between the asset's book value and its salvage value.
5:34mWatch next
Master Retirement of Fixed Assets (No Salvage Value) with a bite sized video explanation from Brian
Start learningRelated Videos
Related Practice
Retirement of Plant Assets (No Proceeds) practice set
Problem sets built by lead tutorsExpert video explanations