How to Dispose of a Single Asset in a Group Asset

Discover the Correct Way to Dispose of Fixed Assets That Were Purchased in a Group

Splitting one fixed asset into multiple assets is a common asset accounting procedure. If you grouped assets when you purchased them, you probably need to split them when you want to dispose of specific fixed assets from the group.

Though easy to accomplish, it is important that you perform this process properly. When you pay attention to the details, your company will maintain compliance with accurate, up-to-date records – and you can congratulate yourself on a job well done.

The Best Way to Do a Fixed Asset Split Is to Use the Right Software

The easiest way to manage, split, and dispose of fixed assets is to rely on a trusted fixed asset management software solution. Sage Fixed Assets is the world’s most used and most-trusted fixed assets software, featuring a clear audit trail, the ability to work with multiple assets at once, and insight into when and why each fixed asset was split at your organization.

Discover the Details on Sage Fixed Assets

When to Dispose of a Fixed Asset

Over time, fixed assets may break or go missing. This is especially the case for small-sized fixed assets, such as laptop computers, mobile scanners, or office chairs. If your most recent fixed asset inventory indicated that some of your assets were missing, you should dispose of those assets from the books and stop depreciating them. You certainly don’t want them to become “ghost” assets.

The best way to tell if an asset is missing or broken is to keep a close eye on what you have, which you can do by through an annual fixed asset tracking process.

How to Dispose of Fixed Assets Using an Asset Split

Sometimes, you need to dispose of one single asset but you purchased a group of those assets at one time and have been depreciating them as a group in your fixed asset depreciation software since then. In this case, you will want to split the asset.

• You can split fixed assets by quantity or net book value
• Correct asset splitting maintains the old asset ID for the remaining items in the group and creates a new asset ID for the split asset.

Here is an all-too-realistic example of how to split one asset into multiple assets, so you can dispose of fixed assets:

Let’s imagine that you purchased 5 laptops in a group. Everyone was working hard with their new laptops but, 6 months later, one of your employees dropped their laptop in the stairwell. We can all agree that now is the perfect time to stop depreciating that laptop, write off your loss, and buy a new one.

So, let’s start:

1. Figure out your background data. You originally purchased 5 laptops in a group, for a total original cost of $4,000. They have a recovery period of 5 years (60 months), so you’ve been depreciating $66.67 each month since then.
2. Now, you need to split one asset off from the group, so you must first adjust your original asset to account for only the 4 remaining working laptops going forward. You will create a new asset that is the broken one of the original 5 laptops.

To do this, you must first determine your ratio. In this case, you will divide 4 by 5 because you’re keeping 4 laptops in the original asset that used to have 5 laptops.

4 / 5 = 80%

That means your ratio for your original asset is 80% and your ratio for the split asset is 20%.

3. Begin calculating your asset split, working first with the newly adjusted original asset group. To do this, multiply your original cost by your ratio.

$4,000 * 80% = $3,200

This shows your newly adjusted original asset cost.

4. Next, divide that number by the laptops’ total useful life in months (60).

$3,200 / 60 = $53.33

This shows your newly adjusted original asset monthly depreciation amount.

5. Multiply that amount by the number of months the laptops were all used before the split (6 months).

$53.33 * 6 = $319.98

This shows the accumulated depreciation for your newly adjusted original asset.

6. Subtract that amount from the adjusted original cost.

$3,200 – $319.98 = $2,880.02

This shows the net value for your newly adjusted original asset.

Now, repeat steps 3-6 to calculate the one split asset’s value.

3. $4,000 * 20% = $800
4. $800 / 60 = $13.33
5. $13.33 * 6 = $80
6. $800 – $80 = $720

$720 is the net value to write off for that one laptop that smashed to smithereens in the stairwell.

Need Help with Disposal of Fixed Assets? Reach out.

 

Serving clients since 1985, Paragon International, Inc. provides independent, impartial and accurate cost segregation analyses, and property valuations and appraisals to assist in and support decisions related to taxes, risk management, investment, financing and corporate planning. Our consultants have extensive fixed asset experience – they’re fixed asset experts. Because of that we are able to offer a unique combination of irreplaceable human resources and advanced technology. We have specialists experienced in valuing closely-held securities, patents and other intangible assets, business enterprises, buildings, equipment and real estate. In addition, Paragon provides complete inventory and asset management services and solutions, including software customization and training, barcode labels and scanners, and tailored inventory services such as data conversion and integration, asset inventories, asset policies, cost reconciliation, and appraisal services. Contact Paragon International to discover how we can help you.