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:
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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.
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Reverses the journal entries for the proceeds of sale, cost of removal, and net book value retired.
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Reverses the journal entries you made to clear the proceeds of sale and cost of removal.
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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:
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Debit back the original asset cost.
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Record the current period depreciation expense.
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Restore the accumulated depreciation.
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Balance the clearing accounts for proceeds of sale and cost of removal.
The specific entries are as follow:
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Debit the asset cost of 4,000 to the Asset Cost account.
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Record the current period depreciation expense as a debit of 250 to the Depreciation Expense account.
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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.
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The cost of removal of the asset is 500, therefore, debit 500 to the Cost of Removal Clearing account.
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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 |