USA Asset Cost Adjustment

[TechConsultant]

I am working on rolling out some new general ledger software and I was curious whether the following functionality is working as intended. The software allows you to register fixed assets from a supplier invoice (e.g. $1000 laptop). From there it allows you to adjust down the cost of the asset (e.g. reduce it from $1000 to $500). When it runs it's course for straight line depreciation and retiring the asset to take it off the books it still keeps the remaining asset balance. Below is the accounting for what I am describing:

Supplier Invoice
Dr FF&E $1000
Cr Accounts Payable $1000

Accounting after all depreciation has run it's course
Dr Depreciation Expense $500
Cr Accumulated Depreciation $500

Retiring Asset After Useful Life
Dr Accumulated Depreciation $500
Cr FF&E $500

Is this a glitch that there is still a balance for FF&E or is there some missing accounting that needs to take place for retiring an asset which has had it's cost adjusted after it was acquired? Any assistance would be most appreciated, thanks!

 

[Triest123]

I am working on rolling out some new general ledger software and I was curious whether the following functionality is working as intended. The software allows you to register fixed assets from a supplier invoice (e.g. $1000 laptop). From there it allows you to adjust down the cost of the asset (e.g. reduce it from $1000 to $500). When it runs it's course for straight line depreciation and retiring the asset to take it off the books it still keeps the remaining asset balance. Below is the accounting for what I am describing:

Supplier Invoice
Dr FF&E $1000
Cr Accounts Payable $1000

Accounting after all depreciation has run it's course
Dr Depreciation Expense $500
Cr Accumulated Depreciation $500

Retiring Asset After Useful Life
Dr Accumulated Depreciation $500
Cr FF&E $500

Is this a glitch that there is still a balance for FF&E or is there some missing accounting that needs to take place for retiring an asset which has had it's cost adjusted after it was acquired? Any assistance would be most appreciated, thanks!

DR Accumulated Depreciation 500
Dr Loss on Disposal 500
Cr FF&E 1,000
Being retired the asset (at Net book Value) after its useful life

Remarks : The gain or (loss) on disposal account should be opened
when retiring an fixed asset.

 

[kirby]

Techconsultant

You list three entries but you are missing the entry to show the writedown of the asset by $500. One you record that into the fixed asset system the system asset value will be the $500 that you need it to be.

 

[TechConsultant]

Impairment vs. Cost Adjustment

The system has a separate impairment function which books the following entry:

Dr Impairment Expense $500
Cr FF&E $500

This apparently is a separate function in the system than the cost adjustment I was describing earlier where it just depreciates based on the adjusted cost and changes the asset value in the fixed asset registry but doesn't change the balance for the asset on the general ledger. Is there a difference between doing an impairment vs. the cost adjustment I described earlier in the thread because the system does indeed have them as 2 distinct and separate functions for assets?

 

[kirby]

The entry you show above should be posted to the general ledger. The fixed asset system should do so. If it does not, then you should do so by journal entry.