So sometimes professors want you to calculate depreciation before the actual sale of the asset. They love to combine these two things together. So let's check out this tougher problem on july 1st 2009. Abc company sold machinery with an initial cost of 52,000. Originally purchased january 1st 2008. So we originally purchased january 1st 2008, but we're selling it notice july that's another big thing, July 1, 2009. So we're dealing with a partial year of depreciation in the second year. So we originally purchased it in January 1, 2008. The machine had an estimated useful life of 10 years and salvage value of 2000. Company uses straight line method and the machinery was sold for 36,000. So we know this. 36,000. What's that gonna be? That's the cash we receive, Right? The cash we received on the sale. So that will end up being in our journal entry. But the first thing we need to do is find out what was our netbook value. They didn't tell us the total amount of accumulated depreciation. We have to figure that out for ourselves. So we bought it january 1st 2008 and we're selling it july 1st 2009. So let's go ahead and find out since it's straight line, we need to find our depreciation per year. So our depreciation expense per year. Well, that's going to equal our cost of 52,000 minus our salvage value of 2000. And we're gonna divide that by our estimated useful life of 10, 52,000 minus 2000 is 50,000 divided by 10, that's 5000 of depreciation per year. Right? So every year we're gonna take 5000 and depreciation. And how long has it been that we've owned the asset and been taking depreciation? Well, we took a full year of depreciation in last year. Right? So we would have had accumulated depreciation. Why don't we keep a t account for accumulated depreciation over here? So in 2008, in 2008, let me write that over here. So in 2008, can you see that? It's a little a little bit on the edge. I'll write it on this side. 2008. Well, we would have taken depreciation of 5000, right? For the full year of 2008. What about in 2009? Well, in 2009, we didn't have it the whole year. Right? We sold it halfway through the year. In july july 1st when this transaction is happening. So we need to take half of a year of depreciation, Right, january, february March, april may june we owned it for six months before we sold it. So we gotta take half a year of depreciation expense. So if 5000 was a full year of depreciation. Well, we would have taken half a year of depreciation. 2500 for those six months that we owned it in 2009. So, that's how this can get. Pretty tricky, right? If they want to combine all of these topics, how you calculate depreciation, partial depreciation as well as the sale of the asset all in one. Okay, So now we know the total accumulated depreciation since we own the asset is 7500. Okay, So now we can calculate the net book value and we can make our our journal entry. So let's go ahead and do this. Let's do our journal entry. We know we received cash of 36,000. Right? So that's definitely gonna be in our journal entry. Cash. 36,000. What else the accumulated depreciation? We got to get that off of our books. We sold the machine. So we no longer have that accumulated depreciation either. So accumulated depreciation. We gotta debit it right? It has a credit balance from our depreciation entries. Well, now we got a debit it to get rid of it. And that's gonna be 7500 right there. And what else we have the actual machines cost? Right? There's gonna be the the the asset value from when we originally purchased it of 52,000, we got to get that off of our books. And that's gonna be with the credit. Right, because that was an asset and we get rid of of the debit with this credit to machinery For 52,000. All right, so the last thing we gotta do is balance this entry right now with the credit to machinery? The debit to accumulated depreciation. We've gotten the asset off of our books. The debit to cash. What we received that cash. The last thing is gonna be the gain or the loss. So our total credits are 52,000. And our total debits at this point are 43,500. Right? So we gotta find the difference between the two. So here we go. The difference between the 52,000 and the 43 500 that we have in debits right now, that's gonna be 8500. Now, is that gonna be a loss? Or again, it's gonna be a loss, right? Because it's going to be on the debit side. Our debits are less than our credits. Now, we need more debits and we can only get these debits from this loss on the sale. So we have a loss on sale and that's gonna be for 8500. Right? And that's going to balance out our entry. And again, this was a plug, right? We plug that in to make our entry balance. So we always want to check if our debits and credits which one's bigger. And if we need more debits, it's a loss. If we need more credits, it's a game. But this should also make sense because if we look at the net book value of the asset on this day. Well, it was 52,000 - Our our accumulated depreciation of 7500. And what does that give us? 52000 -7500. That gives us 44,000. Whoops! 44,500 was our net book value. And what did we sell it for? 36,000? So the 36,000 cash we received minus the 44,500 in the netbook value that we gave up for it. Well, that equals are lost, right? We lost 8500. And that's the loss that went into our entry right there. Cool. So all the math checks out from whatever angle we approach it from. Cool. Alright, let's go ahead and fill this in. We've got cash, we received 36,000 in cash and we got rid of accumulated depreciation of 7500. That increased our assets. But then we got rid of machinery, right? And the machinery was 52,000. So that was a net decrease in our assets. If we take the 52,000 decrease and then we add the 36,000 at the 7500. Well, that gives us a net decrease of 8500. And that net decrease of 8500 is matched by this loss in equity. That's going to show up on our income statement of 8500 as well. So that's gonna bring down our equity and our equation stays balanced. Alright, let's go ahead and move on to the next video.