How do you calculate the gain or loss when an asset is sold?
To calculate the gain or loss on the sale of an asset, you compare the amount of cash received for the asset to the asset's book (carrying) value at the time of the sale. If the cash received is greater than the asset's book value, the difference is recorded as a gain. If the cash received is less than the asset's book value, the difference is recorded as a loss.
In order to have the book value at the time of the sale, you must record the depreciation expense up to the date of the sale.
If the asset is exchanged instead of sold, the accounting treatment will often be different.
