Retirement of Plant Assets (No Proceeds) quiz #1 Flashcards
Retirement of Plant Assets (No Proceeds) quiz #1
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What is the appropriate journal entry when a fully depreciated plant asset with no salvage value is retired with no proceeds?
The journal entry is to debit Accumulated Depreciation for the full original cost of the asset and credit the Equipment (or relevant asset) account for the same amount. This removes both the asset and its accumulated depreciation from the books, with no impact on net income since the net book value is zero. How is the retirement of a plant asset with a salvage value and no proceeds recorded, and what is the financial impact?
When retiring a plant asset with a salvage value and no proceeds, debit Accumulated Depreciation for the depreciated amount, debit Loss on Disposal for the salvage value, and credit the Equipment account for the asset's original cost. The loss on disposal is reported on the income statement and reduces equity. What is the journal entry to retire a fully depreciated plant asset with no salvage value and no proceeds?
Debit Accumulated Depreciation for the asset's original cost and credit the Equipment account for the same amount. When retiring a fully depreciated asset with no salvage value, what is the net book value at the time of disposal?
The net book value is zero because the asset is fully depreciated and has no salvage value. If a plant asset has a salvage value but is disposed of with no proceeds, what is the net book value at disposal?
The net book value equals the salvage value at the time of disposal. How is the loss on disposal recorded when an asset with salvage value is retired with no proceeds?
The loss on disposal is debited for the salvage value and reported on the income statement, reducing equity. What accounts are affected when retiring an asset with a salvage value and no proceeds?
Debit Accumulated Depreciation for the depreciated amount, debit Loss on Disposal for the salvage value, and credit Equipment for the asset's original cost. Why is it necessary to remove a fully depreciated asset from the books even if its net book value is zero?
It is necessary to remove the asset to keep the accounting records accurate and uncluttered, reflecting only assets currently owned and used. Where is the loss on disposal of a plant asset reported in the financial statements?
The loss on disposal is reported in the 'other expenses' section of the income statement. What is the impact on total assets and equity when an asset with salvage value is retired with no proceeds?
Total assets decrease by the salvage value, and equity decreases by the same amount due to the loss on disposal.
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