If the amount of the proceeds is greater than the book value or carrying value of the long-term asset at the time of the sale, the difference is a gain on the sale or disposal. If the amount received is less than the book value, the difference is a loss on the sale or disposal. Depreciation must be recorded up to the date of the disposal in order to have the asset's book value at the time of the sale.
On the statement of cash flows, the proceeds from the sale of long-term assets are reported in the investing activities section, while the gain on the sale appears in the operating activities section as a deduction from net income.
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