I purchase an asset (backhoe loader) on 2019 with financing.
Asset price $137,500
A.Deposit $41,500
B.Finance $112,128
Total acquisiton cost (A+B)= $153,628
Depreciation total for 12 month $16,725.60
Installment period 48 month $2336/month
The asset sold on 13th month. I want to sold the asset with the book value.
How i want to record the sale of asset?
You need to be a bit clearer
You purchased an asset - the purchase value is 137,500
The purchase was financed 41,500 from cash/bank and with a loan of 112.128
What did you value the asset as for the purchase - 137,500 presumably. The finance cost has no bearing on the value of the asset
The loan repayments should be split between capital and interest payments. They loan repayments have no impact on the fixed asset purchase or sale
What is the expected life of the asset, in months?
This will determine the depreciation charge from the time of purchase to the time of sale
Purchase cost less depreciation = book value
If you sell at book value, you will have no loss or gain on disposal
However, you may well have extra finance charges if you end the financing earlier
What sort of finance was it - if HP, you do not actually own the asset
Asset purchase value 137,500
Purchase Deposit paid to supplier 41,500
Balance paid to supplier 96,000 with financing from bank totalling of 112,128 with interest (islamic loan so its insterest fixed amount)
Depreciation entry for 12 month is 16,725.
I want to sell the asset with book value which is in manager record the transaction of purchase 112,128+ 41,500=153,628(total acquisition cost)-16,725(depreciation)= 136,903 book value
What amount i need to sell in order to clear book value and the financing amount in BS? and how to record the transaction?
I think you accounting calculations are wrong and may not conform to tax law in your country - you need to check this with your accountant
I would say that you have purchased an asset for 41,500+ 96,000 = 137,500. This is the amount you paid to your supplier.
You then have a bank loan of 112,128 - it is not clear if this is the amount that was paid to you from the bank or if the bank only gave you the 96,000
Maybe someone with knowledge of Islamic finance rules and procedures could answer this
Clearing book value has nothing to do with the sale price from an accounting perspective. You can sell for whatever price you want (or can obtain from a buyer). The disposal of the asset is described in this Guide: https://www.manager.io/guides/9121. Selling for more or less than book value will affect the balance of Fixed assets - loss on disposal.
As @Joe91 wrote, repayment of the loan is also a totally separate issue.
If this asset is financed using Islamic financing rules then it is more in the nature of a leasing agreement than a fixed asset purchase
Is it that the bank bought the machine for 137,500 (less the 41,500) and is selling it to you for 153,628 which you pay in monthly instalments?
You will only own the asset when the final payment is made, so it should not be in your books at all or if it is it should be offset by a liability of the loan
I don’t understand how you can sell it as you do not own it as such
** ignore this - I don’t really know enough about accounting under islamic rules to make any further suggestions, sorry **
i want to sell the asset to subsidiary company. the new company will continue the payment of balance installment. So i want to write off the amount in the parent company BS by selling it based on book value. but im having problem to write off the financing
You need to talk to your accountant to clarify what accounting procedure to follow, and then see how to make these entries in Manager - what you done to date may be OK or it may be completely wrong
What they try to explain is the following: You bought a fixed asset which has a purchase cost, which is the real purchase value of that asset. How you financed this purchase could be by various means but in your case through a loan. The value of the asset itself depreciates, ie looses value over time and s such when you want to sell it or dispose of it has a rest value = purchase value - depreciation. In your Balance Sheet you will see that the value of your asset has decreases to that rest value (assuming you did the regular write-offs). When you sell the asset, even to a subsidiary you can decide to “invoice” or “receipt” the rest value which will become an income from sales of that asset while the value of the asset in the balance sheet becomes 0. In case you sell it from a lower price then your retained earnings will decrease (as you loose some value of the asset) and vice versa if you sell it for a higher price than your retained earning will increase s it is extra income you generated from that asset.