Page 451 - Accounting Principles (A Business Perspective)

11. Plant asset disposals, natural resources, and intangible assets

Loss realized $ 200
The journal entry to record the sale is:

Cash (+A) 1,500
Accumulated Depreciation—Machinery (+A) 10,300
Loss from Disposal of Plant Assets (-SE) 200
Machinery(-A) 12,000
To record the sale of machinery at a price less than book
value.
When retiring a plant asset from service, a company removes the asset's cost and accumulated depreciation from
its plant asset accounts. For example, Hayes Company would make the following journal entry when it retired a
fully depreciated machine that cost USD 15,000 and had no salvage value:
Accumulated Depreciation—Machinery (+A) 15,000
Machinery (-A) 15,000
To record the retirement of a fully depreciated machine.
Occasionally, a company continues to use a plant asset after it has been fully depreciated. In such a case, the
firm should not remove the asset's cost and accumulated depreciation from the accounts until the asset is sold,

traded, or retired from service. Of course, the company cannot record more depreciation on a fully depreciated
asset because total depreciation expense taken on an asset may not exceed its cost.
Sometimes a business retires or discards a plant asset before fully depreciating it. When selling the asset as
scrap (even if not immediately), the firm removes its cost and accumulated depreciation from the asset and
accumulated depreciation accounts. In addition, the accountant records its estimated salvage value in a Salvaged
Materials account and recognizes a gain or loss on disposal. To illustrate, assume that a firm retires a machine with
a USD 10,000 original cost and USD 7,500 of accumulated depreciation. If the machine's estimated salvage value is
USD 500, the following entry is required:
Salvaged materials (+A) 500
Accumulated Depreciation—Machinery (+A) 7,500
Loss from Disposal of Plant Assets (-SE) 2,000
Machinery (-A) 10,000
To record the retirement of machinery, which will
be
sold for scrap at a later time.

An accounting perspective:

Uses of technology

The main advantages that companies give for having a home page on the Internet are (1) increased
efficiency in the work environment, (2) increased revenue, and (3) faster customer access. A home
page can be developed for a small company for a few hundred dollars and can be maintained for a
fairly low monthly fee. The Small Business Administration has a website at http://www.sba.gov
that provides helpful information to small businesses. One concern that companies have regarding

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