[ITauditor010]

Becker Textbook pages F2-39 and F-40

For the journal entries they provided, they are only reversing the net book value. For example:

New Equipment – Debit

Cash (Boot) – Debit

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Old Equipment – Credit (@ Net Book Value)

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Recognized Gain – Credit

Don’t they have to reverse out accumulated depreciation? For me, I’m thinking more on the lines of:

New Equipment – Debit

Cash (Boot) – Debit

Accumulated Depreciation – Debit

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Old Equipment – Credit (@ COST)

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Recognized Gain – Credit

Am I missing something? Is there a reason why they are only reducing the current net book value of the equipment and not the whole amount (+ accumulated depreciation)?

BEC - 85 (Took May 2011)
FAR - 94 (Took Jul 28 2011)
REG - 87 (Took Aug 17 2011)
AUD - 98 (Took Aug 31 2011)

[jimboace88]

I *think* the asset you're giving up should be credited at its historical cost and debited for accumulated depreciation. This is effectively removing the carrying amount (NBV) from your books. So, yes, the journal entry should contain an elimination of the A/D related to the asset.

FAR 07/27/11 - 87
AUD 10/01/11 - 85
BEC 11/15/11 - 87
REG 01/03/12 - 92

[KERI0323]

Since the credit for the old equipment is at net book value that is already less accumulated depreciation. As you are practicing though, I would recommend not lumping these together because I think it would be better to know the full entry for the exam which is what jimboace88 wrote above.

BEC 10/11/2010 77
AUD 11/30/2010 81
REG 02/25/2011 78
FAR 11/28/2011 74,68, 83 and DONE!!! NTS LA #460

[Author]

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