AA015 Chapter 9

SELLING FIXED ASSETS BEFORE
END OF USEFUL LIFE- Example (a)

a) A machine is purchased on January 1, 2015 for
RM25,000. The estimated useful life is 5 years and no
salvage value. The machine is depreciated using the
straight line method. On January 1, 2017, the machine
is sold for RM20,000.

Answer:
Depreciation Expense = RM25,000 – 0 = RM5,000

5
Accumulated Depreciation:
1/1/2015 – 1/1/2017 = RM5,000 x 2 = RM10,000

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SELLING FIXED ASSETS BEFORE
END OF USEFUL LIFE- Solution (a)

Gain / Loss: Cost Accumulated
Depreciation

Book Value = RM15,000 [25,000 - 10,000]

Cash Received = RM20,000

Gain/ Loss = RM20,000 - RM15,000

= RM5,000 (Gain)

General Journal

2017
Jan 1 Dr Cash
20,000

Accumulated Depreciation - Machine
10,000

Cr Machine
25,000

Gain on Disposa52l

SELLING FIXED ASSETS BEFORE
END OF USEFUL LIFE- Example (b)

b) A machine is purchased on January 1, 2015 for
RM25,000. The estimated useful life is 5 years and no
salvage value. The machine is depreciated using the
straight line method. On January 1, 2018, the machine
is sold for RM8,000 by cheque.

Answer:

Depreciation Expense = RM25,000 – 0 = RM5,000

5

Accumulated Depreciation:
1/1/2015 – 1/1/2018 = RM5,000 x 3 = RM15,000

Gain/ Loss:

Book Value = RM10,000 [25,000 - 15,000]

Cash Received = RM8,000

Loss on Disposal= RM8,000 – RM10,000

= RM2,05300

SELLING FIXED ASSETS BEFORE
END OF USEFUL LIFE- Solution (b)

General Journal

2018

Jan 1 Dr Bank 8,000

Accumulated Depreciation- Machine 15,000

Loss on Disposal

2,000

Cr Machine 25,000

(To record disposal of machine and loss

on disposal)

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EXCHANGE OF FIXED ASSETS

Gain / Loss on Disposal
= Trade-In Value – Book Value (Old Assets)

Book Value > Trade-In ⇒ LOSS
Book Value < Value ⇒ GAIN

Trade-In
Value

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EXCHANGE OF FIXED ASSETS-
Example (a)

a) Syarikat Ronald trade-in an old machine with a new
machine on December 31, 2010. The cost of the new
machine is RM8,000. The cost of the old machine is
RM20,000. The yearly depreciation expense is RM5,000
and the accumulated depreciation until the date of disposal
amounted to RM15,000. Trade-in value for the old machine
is RM4,000.

Answer:

Depreciation Expense = RM5,000

Accumulated Depreciation = RM15,000
Gain/ Loss = Trade-In Value – Book Value

RM15,000] = RM4,000 – [RM20,000 –

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EXCHANGE OF FIXED ASSETS-
Solution (a)

Cash paid for new machine = Cost (New Asset) – Trade-In Value
= RM8,000 – RM4,000
= RM4,000

Journal :

2010

Dec 31 Dr Depreciation Expense- Machine 5,000

Cr Accumulated Depreciation- Machine 5,000

(To record depreciation on machine)

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EXCHANGE OF FIXED ASSETS-
Solution (a)

Journal :
2010
Dec 31 Dr Accumulated Depreciation- Machine15,000

Loss on Disposal
1,000

Machine (New)
8,000

Cr Machine (Old)
20,000

Cash
4,000

(To reco58rd disposal of machine and loss

EXCHANGE OF FIXED ASSETS-
Example (b)

b) Syarikat Ronald trade-in an old machine with a new
machine. The cost of new machine is RM10,000. The cost
of the old machine is RM20,000 and accumulated
depreciation until the date of disposal amounted to
RM16,000. Trade-in value for the old machine is RM5,500.

Answer:

Accumulated Depreciation = RM16,000

Gain/ Loss = Trade-In Value – Book Value

= RM5,500 – [RM20,000 –

RM16,000]

= RM1,500 (Gain)

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EXCHANGE OF FIXED ASSETS-
Solution (b)

Cash paid for new machine = Cost (New Asset) – Trade-In Value
= RM10,000 – RM5,500
= RM4,500

Journal :

Dr Accumulated Depreciation- Machine 16,000

Machine (New)

10,000

Cr Machine (Old) 20,000

Cash 4,500

Gain on Disposal 1,500

(To record disposal o6f0 machine and gain on disposal)

9.5 REPORTING NON-CURRENT ASSETS IN THE
STATEMENT OF FINANCIAL POSITION

❖ Fixed Assets are reported in the Statement of Financial
Position at book value after deducted the accumulated
depreciation.

❖ See the example of presentation in the Statement of
Financial Position.

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Perniagaan Juara
Statement of Financial Position

As at 31 December 2017

Non-Current Asset s 325
Furniture 4,150

3,250
Less: Accumulated Depreciation- Furniture

Machine 41,500
2,925

Less: Accumulated Depreciation- Machine

37,350

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CONCLUSION

⮚ Fixed Assets are long useful lives (more than 1 year),
tangible assets used in the operation of business.

⮚ The cost of fixed assets includes all expenditures
necessary to acquire the asset and make it ready for its
intended use.

⮚ Each fixed assets cost should be allocated over its
useful life using specific method of depreciation.

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CONCLUSION

❖2 methods of depreciation:
- Straight-Line Method
- Reducing Balance Method

❖ 2 basis of depreciation:
- Monthly
- Yearly

❖ Options to dispose Fixed Assets:
- Discard
- Sell
- Exchange for another Fixed Assets

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