How to use the fixed asset disposal gain or loss calculator
- Enter the cost of the asset, its salvage value and its useful life in years.
- Enter the in-service date and the sale date.
- Enter the sale proceeds and any selling costs.
- Read the book value at the sale, the gain or loss and the journal entry.
Formula
Months in service = whole months from the in-service date to the sale date, capped at the life
Accumulated depreciation = (cost - salvage) x months in service / (life in years x 12)
Book value = cost - accumulated depreciation
Gain or loss = proceeds - selling costs - book value
A month counts once its day of the month has been reached. A positive result is a gain and a negative one is a loss.
A $12,000 machine sold after 18 months
The machine cost $12,000, has no salvage value and a life of 5 years, so it loses $200 a month. From January 15, 2025 to July 15, 2026 is 18 whole months, which gives accumulated depreciation of $3,600 and a book value of $8,400.
Sold for $9,000 with no selling costs, the sale produces a gain of $600. The entry debits cash $9,000 and accumulated depreciation $3,600, and credits the machine $12,000 and the gain $600. If it sold for $6,500, the loss would be $1,900, and $450 of selling costs on the $9,000 sale would cut the gain to $150.
What a gain or loss on disposal means
When you sell an asset for more than its book value you report a gain, and for less a loss. Neither means the asset was a good or bad purchase, because the book value depends on the depreciation method and life you chose. A gain often just says that the asset was depreciated faster than it lost real value.
Selling costs, such as a broker fee or transport, reduce the amount you keep, so they are taken off the proceeds before the comparison. The journal entry removes the asset and its accumulated depreciation from the books and records the cash and the gain or loss.
Where this tool stops
The tool uses straight-line depreciation by whole months. Tax rules, half-year conventions, trade-ins, partial disposals and recapture are different and need their own treatment. For the depreciation itself see the Depreciation Calculator and the Fixed Asset Depreciation Register. The Journal Entry Generator can post the entry in full, and the Units of Production Depreciation Calculator is the choice when wear depends on use.
Assumptions and limits
- Depreciation is straight-line and runs in whole months from the in-service date.
- Depreciation stops at the end of the useful life, and the book value never goes below salvage value.
- The figures shown are examples. Use your own costs, dates and proceeds.
- The life is a whole number of months, for example 4.5 years.
Frequently asked questions
What if I sell after the useful life ends?
Depreciation is capped at the full life, so the book value equals the salvage value and the gain or loss is the proceeds less selling costs and salvage value.
How is a partial month counted?
A month counts only when the day of the month has been reached. January 15 to February 14 is zero months, and January 15 to February 15 is one.
Where do selling costs go?
They are subtracted from the proceeds. Some frameworks show them as a separate expense, but the gain or loss comes out the same.
Does the tool handle a trade-in?
No. A trade-in involves the value of a new asset too. Enter the cash you receive for a plain sale.