USA Hypothetical - how to determine value.

[Grimus]

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]

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]

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]

Yup
DR Cash $50
DR Loss on Sale $950,00
CR Equipment $100,000

There ya go. Thanks.