Accumulated Depreciation

LM537 · ‎February 19, 2022

We use a Straight line method of depreciation.
Our building was sold last week.
Do I need to divide Accumulated Depreciation by 2 for Building and Building Maintenance to record it in the entry for Closing Entry?

Thank you

Rustler · ‎February 19, 2022

Building maintenance has nothing to do with the underlying asset or accumulated depreciation, building maintenance is an expense in the year paid.

A building sits on land, land is not depreciable so a portion of the total should be in a fixed asset account for the land.

The remaining amount is the cost basis of the building fixed asset and accumulated depreciation is only calculated on the building value. Typically accumulated depreciation is posted to a fixed asset sub account of the building fixed asset account

I set them up this way (all account are fixed asset)

address

>> land

>> building

>> >> accum deprec building

View solution in original post

Rustler · ‎February 19, 2022

Building maintenance has nothing to do with the underlying asset or accumulated depreciation, building maintenance is an expense in the year paid.

A building sits on land, land is not depreciable so a portion of the total should be in a fixed asset account for the land.

The remaining amount is the cost basis of the building fixed asset and accumulated depreciation is only calculated on the building value. Typically accumulated depreciation is posted to a fixed asset sub account of the building fixed asset account

I set them up this way (all account are fixed asset)

address

>> land

>> building

>> >> accum deprec building

LM537 · ‎February 19, 2022

Rustler,

Thank you so much!

We recorded all capital expenses over $1000 ( that is our policy) over the years to - Building Maintenance ( fixed assets) .

We didn't not depreciate Land.

Accumulated Depreciation was only calculated on the building value and capital expenses of the building over the years. How to calculate remaining accumulated depreciation if we sell in the beginning of the year. I thought that I can just divide by 2 calculations for 2022, as we use straight line method.

Rustler · ‎February 20, 2022

Well that is the point, a capital expense is like a new roof, not maintenance expense regardless of the cost, they are not a fixed asset and do not depreciate - regardless of the company policy.

Annual depreciation is an end of the year entry, or if desired a monthly entry equal to 1/12 of the total annual amount of depreciation. So the most you could have for 2022 is 1/6 of the annual total.

I do not understand the concept of divide by 2 at all, sorry

Check out IRS pub 946

LM537 · ‎February 20, 2022

actually you absolutely right. I just realized that I wrote building maintenance.

we have it under building improvements and those are capital expenses , such as roof repair, was a major one.

Thank you for the pub 946. I'll check it.

Topics

Training

Community

Resources

Accumulated Depreciation