Gain on sale of assets definition
/What is a Gain on Sale of Assets?
A gain on sale of assets arises when an asset is sold for more than its carrying amount. The carrying amount is the purchase price of the asset, minus any subsequent depreciation and impairment charges.
Presentation of a Gain on Sale of Assets
A gain on sale of assets is usually classified as a non-operating item on the income statement of the selling entity. This is because it is generated by a transaction that falls outside of the normal operating activities of the business. However, if the main activity of a business is the purchase and sale of assets (such as a farm equipment dealer), then a gain on sale of assets might very well be classified within the operating income section of the income statement.
Example of a Gain on Sale of Assets
As an example of a gain on sale of assets, a business buys a machine for $10,000 and subsequently records $3,000 of depreciation, resulting in a carrying amount of $7,000. The company then sells the machine for $7,500, which results in a gain on sale of assets of $500.