USA Sold Fully Depreciated Asset on Payment Plan

[Peggy Taranto]

My company has just sold a vehicle which has been fully depreciated. The problem I have booking this transaction is that we sold the vehicle for $5,000, and we are letting them pay for it in monthly installments. The person who purchased it gave us a $600.00 down payment and will pay the balance due of $4,400 over a one year period. I know the final result will be a net loss on sale of asset since the blue book price is $7,250.00. I'm just not sure where to show what's still due and where to book the payments each month.

 

[bklynboy]

Since its fully depreciated just book as a receivable for the amount owed. Debit Cash 600, Debit Receivable 4400 and credit Gain on Sale of Asset - 5000. Each month you get another payment, reduce the receivable.

Doesn't matter what blue book price is so not clear why you say you have a loss. You have a gain.

 

[Steve-LevelUp]

Agreed, it is a gain as the payments received exceed the accounting book value (which is $0)

 

[Axeem]

Hope the entries correct...

 

[Samir]

I wouldn't touch the accounts for the asset or its depreciation. A fully accumulated asset basically doesn't exist accounting-wise, so you are essentially assigning a value to that asset that was now zero and then accounting for all of it as revenue. When debiting the AR account to account for the receivable, a credit would be to a revenue account to recognize the revenue from the sale. And then as each payment is made, the AR account is credited for each payment as the debit is made for cash.