Chapter 1.9® - Selling Capital Assets - Sale of Simulation System Journal Entries & Effects on Accumulated Amortization
Accounting for the Sale of Capital assets is best explained through an example. Consider a simulation system costing $10,000 with accumulated amortization of $6000 as of December 31st, 2008. This system is being amortized using the straight-line method at a rate of $2000/year amortization with no salvage value. The system is discarded as of April 30th, 2009.
Step 1 is to bring amortization expense up to par. Thus, amortization expense as of April 30th, 2009 is:
Now consider 3 separate scenarios, where the organization receives different Cash amounts for the simulation system.
i) Sale at Book Value on April 30th, 2009
ii) Sale above Book Value on April 30th, 2009