 In this presentation, we'll work a few problems related to the disposal of property plant and equipment. We'll start off with the most simple kind of disposal and then we'll add some components and some complexity as we move forward. We will enter the data into this blue area. This is where the journal entry will be. We'll then post it not to the general ledger out just to this worksheet. So we're going to post it to the center column, which will give us a quick view of the effect on the assets, the liabilities, the equity, the fact that we're still in balance and net income. So a worksheet like this is perfect when we just have a few journal entries. So let's see what we have. Equipment is fully depreciated and no cash is received. So in this case, we're going to dispose of this equipment and it has been fully depreciated. The nicest thing to be able to have when working a problem like this is to have the trial balance in front of you. Now when you work problems in book problems, they often won't have that. They'll have to give you the information in some way. But if you can see the actual trial balance, it's best because you can see here's the equipment has a debit balance. Here's the accumulated depreciation. It has a credit balance in this scenario. All we're doing is saying it's been fully depreciated and now we're getting rid of it. We're actually disposing of it in some way and therefore need to take it off the books. Be aware that one, it's not necessarily the case that if it's fully depreciated meaning it has a book value of zero, the value of the equipment minus the accumulated depreciation is zero. That doesn't mean that the company's not still using it. We still may have it. We still may use it and therefore we shouldn't take it off the books unless we do use it. And two, note that there's no salvage value here. We can tell that because we took it down to the full amount here. We didn't leave any scrap metal. So we're not going to be collecting anything on it and we took it down to zero in terms of the calculation for depreciation. Also recognize that in this problem, we're just going to say this is the only piece of equipment. It's $110,000 piece of equipment. We're going to put it on the books, take it off the books. In a real life situation, we would typically have one equipment account which would have be representing multiple pieces of equipment and then go to a sub ledger to remove the piece of equipment we are particularly looking at. Here we want to be able to see it and I want to see it directly, this one piece of equipment being represented in this account to be taken off the books, but just be aware of that the process would be the same. However, we would have a sub ledger that would list out all the components of property plants and equipment and then we would just take out the components related to the piece of equipment we're talking here. We are going to here say that this is the one piece of equipment we're going to be removing from the books which cost $110,000 had accumulated depreciation of $110,000. So we got to remove this from the books, the equipment's on the books with an asset and a debit balance. We need to make it go off the books so we're going to do the opposite thing to it which is a credit. So I'm just going to copy the equipment account, right click and copy. I'm going to put it on the bottom so it's going to be our journal entry. I'm going to put it on the bottom in B6 and right click and paste 123. Then the amount's going to be a credit. I'm going to make that a negative for our journal entry, $110,000. Then we're going to need a debit of the same amount. I'm going to put that in a formula context here by saying negative of this number. We could just type it in there, but I'm going to say negative of that number flipping the sign. And then the other side of course will be accumulated depreciation. So here's accumulated depreciation has a credit balance. We need to take it off the books because the account it relates to equipment has been removed. So it has a credit. We're going to do the opposite which is a debit. So we're going to copy that, put that in B5, right click and paste 123. So here's our journal entry for the removal, the disposal, the most straightforward type of journal entry. If we're disposed of it, we're not getting any cash for it and it's been fully depreciated down to zero. Let's post this out and see what happens. If we go to the accumulated depreciation in H8, we will say equals and then point to the accumulated depreciation in C5 and it'll take the credit balance of $110,000 down in the debit direction by $110,000 zero. Of course, we're out of bounds by $110,000. Now we're going to post the other side to equipment in H7. So within H7, we're going to say equals and point to the $110,000 credit bringing the balance down from $110,000 by $110,000 to zero. So it's achieved our goal of bringing us down to zero, this representing that one piece of equipment that's been fully depreciated. Note what didn't happen, no effect on net income. Net income being revenue minus expenses. We don't have any revenue expense accounts here because we had already expensed the equipment in depreciation and it's fully depreciated at this point in time. So we've already allocated the cost to the periods to allocate them to. We can't allocate any more costs because it's already fully depreciated, already at zero. So let's take a look at another scenario down here.