When an asset is fully depreciated and sold for more than its book value, what is recorded?

When an asset is fully depreciated and sold for more than its book value, what is recorded?

• A. The business records a loss on asset disposal.
• B. The business records a gain on asset disposal.
• C. The business does not record any financial impact.
• D. The bookkeeper removes the asset from the books.

Answer: (B)

When depreciation has brought the asset’s carrying amount down to zero (or to its remaining salvage value), selling it for more than that carrying amount creates a gain on disposal. The difference between the sale proceeds and the asset’s carrying amount is recognized as a gain in the period of disposal. Practically, you remove the asset from the books and record the cash received, and the excess over the carrying amount goes to gain on disposal. This is why the correct result is a gain on asset disposal. If the sale were less than the carrying amount, you’d record a loss instead; simply removing the asset alone wouldn’t capture the financial impact of the sale.

When depreciation has brought the asset’s carrying amount down to zero (or to its remaining salvage value), selling it for more than that carrying amount creates a gain on disposal. The difference between the sale proceeds and the asset’s carrying amount is recognized as a gain in the period of disposal. Practically, you remove the asset from the books and record the cash received, and the excess over the carrying amount goes to gain on disposal. This is why the correct result is a gain on asset disposal. If the sale were less than the carrying amount, you’d record a loss instead; simply removing the asset alone wouldn’t capture the financial impact of the sale.