Can anyone help me out with an accounting problem - PP&E question

this is a pretty simple accounting problem

in order to figure out the gain for the sale, you must first compute the book value of the PPE (Proceeds of sale - Book Value = Gain/loss on disposal; book value = cost - accum deprec.)

I like to setup T accounts anytime a sale of an asset is involved.

First, setup an account for PPE. (This account is based on the cost of PPE and does not take into depreciation. We will make another T account for Accumulated Depreciation.)

You start the year with $100 and end with $256. You make purchases of $237 throughout the year. This means that if the company sold nothing, its ending balance in PPE would be $337. Since you know the company did sell something and its ending balance is $256, the value of the sold equipment must be $81. ($337 - $256)

or... 100 + 237 - X = 256

Next, you must compute accum. deprec. (AD) for the year. AD started at $29 and ends at $98. It incurs an additional depreciation expense of $124. Whenever a company incurs additional depreciation expense, it must increase the accumulated depreciation.

Since we know the company sold PPE, we must make a reverse entry to debit the AD account.

Debit: Accumulated Depreciation Credit: PPE

In this case, we know that the debited AD amount for the year must be $55. (29 + 124 - X = 98)

Therefore, the book value of the equipment is $26.

Cost of sold PPE = $81 Accum. Depreciation = $55 81 - 55 = $26

Proceeds of sale = $49

Proceeds - Book value = Gain/Loss on Disposal $49 - $26 = $23 Gain on disposal.

I hope this helped...my explanation may have been pretty confusing if you are unfamiliar with basic accounting.

Good luck.