The dollar amount of losses incurred when an old asset is sold below book value is added to the purchase price of a new asset in calculating the base for depreciation.
All else being equal, the new asset is typically depreciated separately, although the tax benefits of writing off losses on older assets might provide a net benefit to the company.

Question

Quizplus · Accepted Answer

The loss from selling an old asset below book value is recognized immediately and does not affect the depreciation base of a new asset. Depreciation is calculated based on the purchase price of the new asset alone.

The Dollar Amount of Losses Incurred When an Old Asset