USA Hypothetical - how to determine value.

Joined
Aug 30, 2017
Messages
1
Reaction score
0
Country
United States
Hi folks, first post here. I'm trying to understand some things in accounting world. Here is a hypothetical you can noodle over.

Ok. There's a piece of new equipment someone bought for 100,000 dollars.. But oh no.. They don't want it anymore so they essentially call it trash just sitting around their garage. Someone else comes along and says I'll mix and master a song you are working on for the trash in your garage, and I'll even give you 50 dollars so you can get some food for your dog.

The guy gets all the equipment in the garage as well as a couple of bags of clothes and misc. Junk.

How is the transaction supposed to be written off? $50.00 personal expense?
 

kirby

VIP Member
Joined
May 12, 2011
Messages
2,453
Reaction score
334
Country
United States
Assuming the seller is rational - at least at purchase of new equipment- seller would have recorded new equipment with a book value of $100,000. Proper accounting would have kept it at this value unless an extreme obsolescence or loss in value event happened. But just because "you don't want it" does not qualify for that. So assume asset is still at $100,000 at sale.

Sale is for $50. So entry is

DR Cash $50
DR Loss on sale $99,950
CR Equipment sale $50
CR Equipment $100,000

I'm not sure what this does for you.....
 

Drmdcpa

VIP Member
Joined
Aug 2, 2017
Messages
499
Reaction score
42
Country
United States
Your journal entry does not balance the way I read it. You also did not give a time frame.

Accountants are generally not so much concerned with the value of things as they are in recording economic reality.

Appraisers, sellers, buyers are more concerned with value.
 

kirby

VIP Member
Joined
May 12, 2011
Messages
2,453
Reaction score
334
Country
United States
Yup
DR Cash $50
DR Loss on Sale $950,00
CR Equipment $100,000

There ya go. Thanks.
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Members online

No members online now.

Forum statistics

Threads
11,684
Messages
27,655
Members
21,542
Latest member
hireus4steamcleaning
Top