A disposal is a rollforward event, not merely a cash receipt. In Beacon's bounded vehicle sale, gross Equipment of $50,000 and its related $35,000 Accumulated Depreciation both leave the accounts. Cash of $18,000 enters. The balancing $3,000 credit is a gain because proceeds exceed $15,000 carrying amount.
Debit Cash $18,000
Debit Accumulated Depreciation 35,000
Credit Equipment 50,000
Credit Gain on Disposal 3,000
ASC 360-10-40-5 places gain or loss recognition at derecognition and directs the reader to the applicable Topic. For this bounded noncustomer sale, ASC 610-20-32-2 compares measured consideration with the carrying amount of the distinct asset.
Three paths from one sale
The balance sheet loses the asset's gross and contra balances and gains cash. The income statement reports only the residual gain or loss. The cash-flow statement reports the applicable cash proceeds; under these bounded facts, the gross $18,000 receipt is an investing inflow. In an indirect operating reconciliation, the $3,000 gain is removed from net income's operating bridge so an investing result is not left in the operating subtotal.
Controls and boundaries
Tie the asset identifier, sale date, control transfer, gross amount, related contra balance, proceeds, transaction costs, and counterparty scope before recording. This example excludes trade-ins, abandonment, partial sales, businesses, subsidiaries, customer contracts, noncash or variable consideration, financing, repurchase rights, taxes, and held-for-sale guidance.
Put the concept to work
Understand this concept
- Explain why a simple asset sale removes gross cost and related accumulated depreciation while keeping cash proceeds distinct from gain or loss.
Apply this concept
- Apply a bounded cash-sale derecognition by removing cost and accumulated depreciation, recording proceeds, and deriving the supported gain or loss.
Learning resources
Choose a lesson, try an application, or inspect the sources behind this concept.
Build on these ideas
- Accumulated depreciation — Analyze
To understand this concept: Required. The related cumulative contra balance must be identified and removed with the disposed gross asset.
- Asset disposal — Understand
To apply this concept: Required. The entry must represent derecognition and consideration rather than treating proceeds as the residual income effect.
- Carrying amount — Analyze
To understand this concept: Required. Derecognition requires a supported amount for the asset immediately before the disposition.
Show 2 more prerequisites
- Gain or loss on disposal — Understand
To apply this concept: Required. The balancing income effect follows from net proceeds less carrying amount.
- Investing cash flow — Understand
To understand this concept: Helpful. The cash receipt has a statement-of-cash-flows path distinct from the income-statement residual.
Lessons
Worked examples and cases
- Derecognize a delivery vehicle and trace the sale
- Reconcile Cedar Forge's PP&E movement schedules
- Resolve Beacon's Year 4 long-lived-asset review
Show 1 more examples and cases
Practice
Common mistaken ideas
Sources
Standard references
More specific topics
Related concepts
Show 11 more related concepts
- Carrying amount
- Derecognition
- Discontinued operation
- Gain or loss on disposal
- Group and composite depreciation
- Held-for-sale long-lived asset
- Investing cash flow
- Nonmonetary asset exchange
- Partial-period depreciation
- Property, plant, and equipment rollforward
- Subsequent expenditure on property, plant, and equipment
Use this idea next
- Asset disposal — Apply
Required level here: understand. Required. The entry must represent derecognition and consideration rather than treating proceeds as the residual income effect.
- Business-disposal net cash flow — Understand
Required level here: apply. Required. The learner can already separate proceeds from gain or loss for an asset.
- Gain or loss on disposal — Analyze
Required level here: understand. Required. The complete derecognition event supplies the gross, contra, cash, and income paths that must articulate.
Show 5 more next steps
- Held-for-sale long-lived asset — Understand
Required level here: understand. Helpful. Classification precedes but does not itself complete derecognition.
- Involuntary conversion — Understand
Required level here: apply. Required. The lost asset's gross and accumulated amounts must be removed from its own supported carrying amount.
- Nonmonetary asset exchange — Understand
Required level here: understand. Helpful. The surrendered asset's carrying amount must be removed separately from measuring the asset received.
- Property, plant, and equipment rollforward — Analyze
Required level here: apply. Helpful. Disposals remove gross cost and associated accumulated amounts rather than only netting cash proceeds.
- Subsequent expenditure on property, plant, and equipment — Analyze
Required level here: understand. Helpful. A replaced identifiable component may need removal rather than coexistence with its replacement.