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Dispose of an asset in Fixed Asset Manager (FAM)

When disposing of a Fixed Asset when using Fixed Asset manager, there are 2 parts to the process:

  1. Dispose of the Asset in Fixed Asset Manager (FAM).
  2. Enter a journal entry in QuickBooks to record any gain or loss on the sale/disposal of the asset and zero out the fixed asset.
Detailed Instructions

To dispose of an asset in Fixed Asset Manager (FAM) there are 2 options depending on if you need to dispose of a single asset or multiple assets at once (ex. sold all of the computers in your office).

 To dispose of a single asset: 

  1. In the Schedule tab of Fixed Asset Manager, select the asset for which you are entering disposition information.
  2. Click the Disposal tab.
  3. In the General Disposition Information section, click the Yes check box for the “Has this asset been disposed?” option.
  4. Enter a description for the asset sale, using up to 50 letters and numbers or select a description that you previously entered. To see a list of the descriptions that you previously entered, select this field, then click the down arrow that appears to the right of the field.
  5. (Optional) Select a property type from the list. The property type you choose determines where the disposal information appears on Form 4797, Sales of Business Property, when you import information from the Fixed Asset Manager client file into a ProSeries client file. To see the list of property types, select this field, then click the down arrow that appears to the right of the field.
  6. Use the Tab key or your mouse to select the Date of disposition field in the Federal column of the Basis Disposition Information section.
  7. Enter the month, day and year of the disposition. This date affects the amount of depreciation calculated for the current year and how the gain or loss is treated in the client’s tax return.
  8. Review the Fixed Asset Manager calculations in the fields that are described in the table below. When you finish entering disposal information, choose File > Save

To dispose of multiple assets:

  1. In the Schedule tab of Fixed Asset Manager, select the assets you want to dispose. Use the Ctrl key on the keyboard and the left mouse button to select multiple assets.
  2. Click the Asset drop-down menu and select Dispose Assets.
  3. In the Dispose Multiple Assets window, enter the Disposition date for all assets being disposed.
  4. Also, enter a Sale Description for all assets using up to 50 letters or numbers. You do not have to choose a unique description. When you are finished with your entries, click Next.
  5. (Optional) Use the Property Type window to indicate where the information for this disposal should print on the Form 4797 Tax Worksheets and where it should be reported on Form 4797, Sales of Property in the ProSeries Tax client. Click Next.
  6. Use the Allocation Method for Disposition Amounts window to select either Use the same amounts for all assets or Allocation amounts using the basis (Federal, AMT, ACE, Book, State, Other) and either Cost or Remaining Basis, then click Next.
  7. In the following series of wizard screens, enter the amount in the Total for all assets box. You’ll notice that Fixed Asset Manager automatically allocates the percent and amount to each asset for each of these wizard screens:
    • Allocate Sales Price
    • Allocate Sales Expense
    • Allocate ITC (Investment Tax Credit) Taken
    • Allocate Disposition Basis
    Make sure you enter the total amount for all assets, then, if necessary, modify the percent or amount to allocate to individual assets. You must allocate 100% of the total. As you change the amount or percent for individual assets, any unallocated amount is reflected in the “Unallocated:” line. The “Unallocated” amount can be allocated evenly between all assets by entering 0.00 in the “Unallocated:” line.
  8.  In the Summary page, a summary table of the assets that you selected to dispose appears. Review the table carefully. You can use your mouse to resize any columns of information that are too narrow. Click Back if you want to go back and edit a selection, otherwise, click Finish.

Field

Description

Sale price

Enter the actual sales price or the fair market value of all property or services received prior to deducting any expenses of the sale or disposal. Adjusted basis is subtracted from this amount to determine the gain or loss.

Expense of sale

Enter any costs of sales or disposal. Such costs can include advertising, commissions or delivery. This amount is added to the cost or basis to determine the adjusted basis. You cannot enter a negative amount.

ITC Taken

Enter the ITC and other credits that affect the sale of the asset. This amount is for informational purposes only.

Cost or basis

The initial cost or basis appears for the asset. You cannot adjust this amount in the Disposal folder.

Section 179

deduction

This is any Section 179 deduction taken for the asset. You cannot adjust this amount in the Disposal folder.

Special Depr.

Allowance

This is any Special Depreciation Allowance taken for this asset. You cannot adjust this amount in the Disposal folder.

Disposition basis

Enter a separate regular and AMT basis for assets acquired in a trade if, while in service, the business-use percentage for the disposed of asset was less than 100%. You must adjust the basis of such an asset by reducing it by the prior depreciation constituting the personal use portion. Enter the total recomputed regular and AMT basis for disposition purposes.

Depreciation after

1975

 

For Section 1250 property, enter any additional depreciation taken after 1975 to compute the recapture amount. For MACRS residential and nonresidential real property and other section 1250 property depreciated on a straight-line method, there is no additional depreciation.

Applicable

percentage

 

Enter “100” for Section 1250 property that is not low-income rental housing. To determine the applicable percentage for low-income rental housing, see the IRS instructions for Form 4797, Part III.

Depreciation after

1969 and before

1976

For Section 1250 property, enter additional depreciation taken after 1969 and before 1976. You may reduce this amount of recapture by the amount, if any, that straightline depreciation after 1975 exceeded actual depreciation taken after 1975.

Accumulated

Depreciation

Fixed Asset Manager calculates accumulated depreciation as current depreciation through the date of disposal plus any prior depreciation. This amount is subtracted from the cost or basis to determine the adjusted basis.

Unrecovered basis

Fixed Asset Manager calculates adjusted basis as:

(Cost or Basis + Sales or Disposal Expense)

- ITC basis reduction

- Other deductions

- Accumulated depreciation

The program uses the adjusted basis in determining the gain or loss.

Gain/loss on sale

Fixed Asset Manager calculates a gain or loss as Gross Sales Price - Adjusted Basis.

Form 4797 gain/loss

(excluding Sec. 179)

This field is only visible for 1065 and 1120S clients. It shows the Gain/loss on a sale with the Section 179 deduction excluded

Recording the Gain or Loss on the Sale/Disposal of a Fixed Asset

The final step to recording the sale or disposal of a fixed asset is to create a General Journal entry in QuickBooks to record the gain or loss on the item and to zero out the fixed asset.

Fixed Asset Sold at a Gain

In this situation the item is sold for more than its book value and there is a gain (income) on the sale. The general journal entry for this situation is:

Debit

Credit

 

Accumulated Depreciation (cost less the book value)

 

Cash Received

 

 

Gain on Sale (Cash less the book value)

 

Cost (Original purchase price)

Here’s an example of a fixed asset sold for a gain. Suppose you purchased a vehicle for $15,000 and after two years had an accumulated depreciation of $9,000. You then sold the car for $8,000. The journal entry in QuickBooks would be:

 
Fixed asset JE:  gain
 
 

Fixed Asset Sold at a Loss

In this situation the item is sold for less than its book value and there is a loss (expense) on the sale. The general journal entry for this situation is: 

Debit

Credit

 

Accumulated Depreciation (cost less the book value)

 

Cash Received

 

Loss on Sale

 

 

Cost (Original purchase price)

Here’s an example of a fixed asset sold for a loss. Suppose you purchased a vehicle for $15,000 and after two years had an accumulated depreciation of $9,000. You then sold the car for $5,500. The journal entry in QuickBooks would be:

 Fixed asset JE:  loss

 

Fixed Asset Sold at a Wash

 In this situation the item is for an amount equal to its book value, thus there is neither a gain nor a loss and thus the asset is simply removed from the books with the following journal entry:

Debit

Credit

 

Accumulated Depreciation (cost less the book value)

 

Cash Received

 

 

Cost (Original purchase price)

 Here’s an example of a fixed asset sold at a wash. Suppose you purchased a vehicle for $15,000 and after two year had an accumulated depreciation of $9,000. You then sold the car for $6,000. The journal entry in QuickBooks would be:

 
Fixed asset JE: wash
 

Note: It’s important to post depreciation for the fixed asset up to the day on which you which to disposed of it. Be aware that when using some conventions such as Half-Year you may have to be careful with the way you post your depreciation so that Fixed Asset Manager doesn’t continue to try to post depreciation after the asset has been disposed of.

KB ID# HOW13553
4/24/2014 1:56:30 AM
PPRDQSSWS401 9102 Pro 2013 5db9f0