Final answer:
The journal entry for selling fixed assets above book value involves debiting accumulated depreciation, debiting cash for the sale amount, crediting the fixed asset for its original cost, and crediting a gain on disposal account for the gain realized.
Step-by-step explanation:
The journal entry (JE) for selling fixed assets above book value, which results in a gain, typically involves several accounts. When fixed assets such as property, plant, or equipment are sold for more than their book value (the value at which they are carried on the books, adjusted for depreciation), the difference between the selling price and the book value is recorded as a gain on disposal of assets.
The basic journal entry would debit the accumulated depreciation to remove it from the books, debit cash for the amount received, credit the original cost of the asset, and credit a gain on disposal account for the difference, which represents the gain from the transaction. This gain is reported on the income statement and has a positive effect on the firm's net income.
For example, if a firm sells a piece of equipment with a book value of $50,000 for $70,000, the journal entry would be: Debit cash for $70,000, debit accumulated depreciation to remove the asset's accumulated depreciation, credit the equipment account for the asset's original cost, and credit gain on sale of asset for $20,000, representing the gain over book value.
Journal entry, fixed assets, and gain on disposal are important concepts within this context.