Review Journal Entries for Reinstatement Transactions

This example illustrates how a company can record a journal entry that can be used for reinstatements.

Oracle Assets:

• Creates journal entries for the reinstatement to debit the asset cost, credit accumulated depreciation, and reverse the gain or loss you recognized for the retirement.

• Reverses the journal entries for the proceeds of sale, cost of removal, and net book value retired.

• Reverses the journal entries you made to clear the proceeds of sale and cost of removal.

• Creates journal entries to recover the depreciation that wasn't charged to the asset and for the current period depreciation expense.

Scenario

Acme Company discovers that it incorrectly retired an asset. The error was discovered in the same period that the asset was retired.

Reinstatement Tasks

Acme must:

• Debit back the original asset cost.

• Record the current period depreciation expense.

• Restore the accumulated depreciation.

• Balance the clearing accounts for proceeds of sale and cost of removal.

The specific entries are as follow:

• Debit the asset cost of 4,000 to the Asset Cost account.

• Record the current period depreciation expense as a debit of 250 to the Depreciation Expense account.

• Credit 2,750 to the Accumulated Depreciation account. In other words, credit 2,500 for the original accumulated depreciation before the asset was retired and 250 for the current period depreciation.

• The cost of removal of the asset is 500, therefore, debit 500 to the Cost of Removal Clearing account.

• The proceeds of sale of the asset is 2,000, therefore, credit 2,000 to the Proceeds of Sale Clearing account.

Journal Entries for Reinstatements

The following table shows the journal entries created when using this example:

Account	Debit	Credit
Asset Cost	4,000 USD	None
Cost of Removal Clearing	500 USD	None
Depreciation Expense	250 USD	None
Accumulated Depreciation	None	2,750 USD
Proceeds of Sale Clearing	None	2,000 USD