Hello all!

How would you go about recording the disposal of a fixed asset in the form of a donation. The assets was donated to another company. Obviously there would be a credit to the fixed asset, but what would be debited? There is no accumulated depreciation because the asset was donated at the end of last year. So there would be a debit to depreciation expense for the current year (2006) but where would the remainder of the debit go to?

Thanks in advance!

The asset should have been removed the previous year. I am assuming that the prior year books are closed and unchangeable. It sounds like the asset was inadvertently left on the books and depreciated each month this year. In this case I would give the disposal date as 01/01/06 and correct the deprecation expense you have incurred so far this year. You should note this to your auditors. If the asset value is large enough, it may required different treatment.

Why isn't there accumulated depreciation? Accumulated Depreciation should not be closed out for an asset until the asset is removed from the books.

I believe the entry should be:

Debit Accum Depr
Debit Loss on Donated Asset
Credit Depr Exp (for 2006 depr)
Credit Fixed Asset

You would not credit Goodwill.

abril;

Here is why dj36 noted a credit to Depreciation Expense.

In the original question, the asker stated that the equipment was donated in 2005, we know this because he stated there was no accumulated depreciation in 2006 because the item was donated the year prior, yet the asker noted that there was depreciation expense recorded for 2006. Since the item was donated the year prior, it should have been written off the books that same year. To do that Accumulated Depreciation would be debited and Equipment would be credited, the difference between the two (since this is a donation) would be the loss and credited as such. If they inadvertently recorded depreciation expense in 2006, it has to be removed and therefore must be put in as a credit. This is why dj36 credited Depreciation Expense, to remove the amount debited to the expense account in 2006.