What is the entry to remove equipment that is sold before it is fully depreciated?

Entries To Record a Sale of Equipment

When equipment that is used in a business is disposed of (sold) for cash before it is fully depreciated, two steps must be taken:

  • Record the depreciation expense right up to the date of the disposal
  • Remove the equipment's cost and the up-to-date accumulated depreciation, record the cash received, and record the resulting gain or loss

The first step requires a journal entry that:

The second step requires another journal entry to:

  • Credit the account Equipment (to remove the equipment's cost)
  • Debit Accumulated Depreciation (to remove the equipment's up-to-date accumulated depreciation)
  • Debit Cash for the amount received
  • Get this journal entry to balance. If a debit amount is needed (because the cash received was less than the equipment's book value), record a debit to Loss on Disposal of Equipment. If a credit amount is needed (because the cash received was greater than the equipment's book value, record a credit to Gain on Disposal of Equipment

(If the equipment is traded-in or exchanged for another asset, the second step will be different.)

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