Asset Value More Than it Really Is - What can I do?

Thank you.  I am trying to do this myself as our company is not doing much and can't afford to pay the accountant.  We sold a truck as it wasn't worth near what we paid for it.  I entered the sale and it took the vehicle asset down by that amount but the vehicle asset is out by about 40,000 now (truck cost us 60,000 sold it for 20,000) so wasn't sure what step to take next.  I have been reading.  Doing our own T2 this year as well so it has been a real learning curb.  Used to do our company taxes when it wasn't a corporation but now have to learn how to do this.   If you have suggestions please let me know....if not, thanks for replying.  Really appreciate it.

The basic form of the entry is as follows:

Debit Accumulated Depreciation (Fixed Asset) for the amount related to the truck.
Credit Fixed Asset for the full amount ($60,000).
Debit Bank for the proceeds ($20,000).
Debit Gain/Loss on Disposal of Assets (Other Expense account) for the balance.

You may also have to take HST/PST/GST into account.

I presume you are aware that the calculations for your T2 return may be completely different from the above. 

Thanks for your help.  I can do this.  Should I have a "Gain/Loss on Disposal of Assets" in my Chart of Accounts under expense?  Don't have one but I can make one. 

I did collect HST for this truck.  Created an invoice for the sale. So the HST should be taken care of - had to pay Rec. General  :(           So when I received the cheque it  went into our bank so would I still do the steps for the bank as you answered above?

The calculations I am using for my T2 are going to be from my Balance Sheet Report.  I have been comparing last years that the accountant did from his T2 for 2010 - all the numbers were from the balance sheet from 2010 or so it seems right now. 

Thanks for your help - sure is greatly appreaticated!!!!

Yes you will have to create the Gain/Loss account in your Chart of Accounts. Your HST should be correct and you would still deposit your cheque as Safari suggests.

Hi,  Did the adjustments but now my bank account says I have 20000 more than it should. This is because when I did the invoice for the sale of the truck - when I received the money for it - I received it in the "Recieve Payment" under customers.  Now what should I do???

Really appreciate the help.  The vehicle asset is now correct and the vehicle depreciation is correct but now the bank is out......UGH!

Can anyone tell me what to do about the above please.  Should I delete the invoice? and put it in like the above so it isn't double entered?

It can't be just the bank that is out.  There must be another account out as well.  (maybe income?)

What item did you use for your invoice?  Which GL does it attach to?  You don't want to use anything that will make the sale of the truck income.

It sounds as if you've doubled up by using Safari's steps AND the invoice. 

You need to make your cash received and your depreciation and your loss equal the original value of the truck.  There are a number of ways of doing that, and I think you've combined them without realizing what the implications were.

I'm not going to tell you to delete the invoice, because you shouldn't delete it without deleting your payment - and to delete the payment, your deposit (assuming one was done from the payment) has to be deleted first.   It's convoluted & you need to think it through - maybe draw a flow chart and get it sorted out on paper before you start changing things around or 'fixing' them in QuickBooks.  (The invoice took care of the HST nicely, so it might be better to keep it if your item is linked correctly.)

Kate

Thinking further - I have a suggestion, but don't do it without carefully reviewing first.

If your truck asset & hst & your bank were where they should be before you made the journal entry - you should probably delete the journal entry.

Then open up a trial balance.  Look at what is left for truck & what there is for truck depreciation.  Do a journal entry to reverse those amounts.  (Credit truck, debit depreciation)  The third line on the journal entry will be a debit amount of the balance to your gain/loss on sale of assets expense account.  Using the trial balance will make sure that you get your debits & credits right.  The truck asset & depreciation account should be zero after the entry is done.  Your bank should not be affected.

Kate

Hi Kate,

Thanks for helping.  Before I did the journal entry my bank and hst was correct.  HST still is.  I knew my truck asset was out to lunch so that is why I asked the question.  Taking the amount of the cost of truck and depreciation works but of course not the bank deposit again.  I was worried about that as I knew I had already received payment.  So not sure how I can enter the depreciation, original cost and the gain\loss (it is a gain) and make a journal entry without the difference (which was what we sold the truck for)  i can leave the invoice in with only the HST and then it would work.  Can I do that?  I sure appreciate your help.

As long as your truck GL is currently $40,000 (so you know the invoice cleared the $20,000) you should leave the invoice as it is.  It sounds like it worked fine.  Now you need to record the rest of the transaction which the changed journal entry should do.  (Safari had it right when he described the entire transaction, but you'd already done part so it didn't work for you.)

Change the journal entry so it only includes the balance of the truck, the depreciation and the gain/loss.

It will work because the gain/loss plus the depreciation equals the balance of the truck per your GL.

Don't include a bank account line OR the total original value of the truck.

Kate

 Hi Kate.   

Thanks for getting back to me.  We don't have a balance owing on the truck.   Is this what u mean?

Not a balance owing on the truck, the balance in your truck GL after the sale.  ($40,000?)

Kate

Hi Kate,

That is what I thought you meant but just wanted clarification.  I have solved the problem by just entrying what I thought i should do from the start - all works out.  My fault at the beginning in not making myself clearer.  I had just wanted to find out for sure if I was on the right track as my accountant used to make the adjustments but I will from now on.  I will make sure to make a spreadsheet on all assets to continue the depreciation - my accountant had one but hasn't shared it - all the vehicles are together  - no problem if you have the spreadsheet - and don't have to go back all the years to find out step by step what was done.

Sure appreciate your help.  I am not finding the T2 hard to do at all - a little homework - looking at past T2's in our company - seeing what has already been done.  So all is good.

Thanks again -much appreciated.