When disposing of a Fixed Asset when using Fixed Asset manager, there are 2 parts to the process:
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:
To dispose of multiple assets:
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.
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.
This is any Section 179 deduction taken for the asset. You cannot adjust this amount in the Disposal folder.
This is any Special Depreciation Allowance taken for this asset. You cannot adjust this amount in the Disposal folder.
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.
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.
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.
1969 and before
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.
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.
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:
Accumulated Depreciation (cost less the book value)
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 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:
Loss on Sale
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 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:
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:
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.