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

Author:
Harold Averkamp, CPA, MBA

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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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

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