how we treat when we purchase new asset and we already have an old one

QUESTION

how we treat when we purchase new asset and we already have an old one with poor performance with solvage value

When we purchase a new asset and we have an old one with poor performance, then we estimate the salvage value of the old asset and calculate the profit or loss on the same. The book value of the old asset is the depreciated value, i.e. purchase price less depreciation amount. This value is then compared with the estimated salvage value. If the salvage value is more than the written down book value,¦

hen the company gains and otherwise it incurs losses. If the company gains, such gain is subtracted from the cost of the new asset; and if it loses, then the loss amount is added (after considering the tax effect), to calculate net purchase price of the new asset.

ANSWER:

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