Documented below is a method for disposing (or salvaging) part of a Fixed Asset. The steps are:
- Split the asset into two assets on the day asset depreciation was last calculated / entered.
- Dispose of all of one of the Manager assets on the date the disposal occurred by the normal method
To further expand on step 1, consider a simple example:
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Three desks bought on 1 January 2016 for $1000 each plus GST 10%. They are grouped as one asset as the time it was thought very likely all would be disposed of together, say at the end of a 5 year lease.
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We will assume straight line depreciation of 20% pa (what is actually used is doesn’t change the process but we need something for illustration)
The above is recorded in Manger as
Acquisition costs
Depreciation
An unexpected event then occurs and one of the desks needs to be disposed of prematurely, say a clerk is replace by a computer. To spit the three tables into 2 separate assets:
Create a new asset
On the date of the last depreciation adjustment, transfer the cost of 1 of the three desks to the new asset.
Amount = (Cost of purchasing all 3 assets) x 1/3 = $3000/3 = $1000
On the date of the last depreciation adjustment, transfer the Depreciation of 1 of the three desks to the new asset.
Amount = (Total depreciation of all 3 assets) x 1/3 = $2100/3 = $700
The resulting Asset register is now split but the totals are not changed
The original Manager asset recording all the history clearly
Acquisitions costs
Depreciation
The corresponding entries for the new “Desk” asset contain only the single journal entry and single depreciation entry.
Either of these Manager assets can now be independently disposed of at any date after 30 June 2019. Any retained asset can also continue to be depreciated by the normal Manger methods.