How to Handle Asset Trade Ins Through Fixed Assets

Question:  I have an existing asset in MIP that have traded in towards the purchase of a new asset. How is that handled in Fixed Assets?

Answer: The accounting entries for trading in Fixed Assets are not handled through the Fixed Asset system. They are handled separately from the treatment of the assets involved in the transaction. In most cases there are three transactions. The disposal transaction (which comes from fixed assets), the transaction to record the purchase of the new asset and an adjustment if needed to account for the differences in value. It may be possible to account for the differences in transaction to record the purchase. That is an accounting decision that is up to you.
 
In Fixed Assets you would dispose of the asset that was traded in. If this asset still has an amount to depreciate that amount will be booked to your Gain/Loss account. The disposal entry will look like this:
 
                                                                                DB                          CR
Accumulated depreciation                                          90
Gain/Loss on Assets                                                  10
Fixed Assets                                                                                            100
 
If the asset was fully depreciated there will be nothing booked to the gain/loss.
 
NOTE: The disposal process will take depreciation between the last depreciation date and the disposal date if any value remains. This cannot be bypassed.
 
After disposing of the old asset, you would go ahead and set the new asset up. When setting this new asset up the Cost/Basis is the accounting value of the asset that you wish to depreciate. This may be different from the cash you paid for it if a trade in was involved. The entries to the asset account and the value used in the cost should reflect the full accounting value of the asset. If you are unsure of what that should be or what to offset it against consult with your accounting advisor.
 
Question: What if the asset was fully depreciated but we got some value in the trade in?
 
Answer: You would still do a disposal of the asset, though nothing would be booked to gain/loss. When you set the new asset up you still use the full value of the new asset. You would need to use a JV to account for the gain or trade in value from the old, depreciated asset.
 
Question: What if there is a loss on the trade in value of the asset?
 
Answer: You would still do a disposal of the asset; the full remaining amount of the asset would still be booked to the Gain/Loss Account. You would then use a JV to account for the loss on the trade it. It would not affect the value of new asset that you set up.
 
Question: What if we sold the asset but the amount we got was not the same as the remaining value of the asset or what was booked in the disposal to the gain/loss account? How do we handle that?
 
Answer: Regardless of the value you got for the sale of the asset the process is the same. You would dispose of the old asset, do a transaction in accounting to record the sale and then a JV to match up any differences. The setup of the new asset would be unaffected.