April 23, 1998PRIVATE 

**(Revised August 1998)**

**CASE STUDY - Disposition of personal property**

NOTE:

40 USC, 481(c), In acquiring personal property, *any executive agency*, under regulations to be prescribed by the Administrator, subject to regulations prescribed by the Administrator for Federal Procurement Policy pursuant to the Office of Federal  Procurement Policy Act *may exchange or sell similar items and may apply the exchange allowance or proceeds of sale in such cases in whole or in part payment for the property acquired* . . . . . .

According to OMB, the Federal Property and Administrative Services Act (FPASA) of 1949 *gives all agencies, unless directed otherwise in their specific legislation, authority to collect* proceeds from sale of personal property which can be applied to replace similar property during the fiscal year in which the property is sold and one fiscal year thereafter.  The collection will be brought in as an offsetting collection on line 3 of SF133.

Assumption: 

For illustrative purpose the calender year is used for the accounting period.

The case study illustrated is a very simple and basic scenario for annual appropriation.  This model **may** be used for multi year or no year accounts when applicable.  

 In reality the acquistion and the sale of property probably will occur within several years.  However, for this illustration the  purchase of the original equipment was made in year 1 (expired) and the sale of original equipment and the purchase of replacement property were made in year 2 (unexpired).

**YEAR 19X1**

PRIVATE EVENT DESCRIPTION

ANNUAL APPROPRIATION 

(EXPIRED)

F3845 - PROCEEDS OF SALE, PERSONAL PROPERTY (CLEARING ACCOUNT)

1) An agency receives appropriations and it is apportioned and allotted

**Proprietary**

 1010FBWT2,000  

3100Unexp App2,000

**Budgetary**

4119Other Appro Realiz2,000

4450Unapportioned auth ava2,000

4450Unapportioned auth ava2,000

4510Apportionment2,000

4510Apportionment2,000

4610Allotments2,000

2) $1,700 is obligated to purchase  equipments A, B and C (**original**) 

**Proprietary**

None

**Budgetary**

4610Allotments1,700

4801Undel Ord - unpd1,700

3) The agency makes following purchases on 3/30/X1:

Equipment A for $600

Equipment B for $400 

Equipment C for $700

**Proprietary**

1750Equipment1,700

1010Fund Bal w Trea1,700

3100Unexpended approp1,700

5700Appro Used1,700

**Budgetary**

4801Undel Ord - unpd1,700

4902Exp Authority - pd1,700

4)To record depreciation expense  for the year (12/31/X1)

Equipment A $10/month

Equipment B $ 5/month

Equipment C $12/month

$27 x 9 = $243

**Proprietary**

6710Depreciation exp243

1759Acc Dep243

**Budgetary**

None

**YEAR 19X1**Preclosing Trial Balance and Closing Entries

PRIVATE **Proprietary**

**Budgetary**

Preclosing Trial Balance

Preclosing Trial Balance

1010Fund Balance with Treasury   300

1750Equipment1,700

1759Accumualted Depreciation    243

3100Unexpended Appropriation     300

5700Appropriation Used1,700

6710Depreciation expense   243                              

$2,243 $2,243

4119Other Appropriations Realized2,000

4610Allotments - Realized Resources   300

4902Expended Authority - Paid                             1,700

$2,000$2,000

Closing Entries

Closing Entries

5700Appropriations Used1,700

3310Cumulative results1,700

3310Cumulative results243

6710Depreciation Expense243

4902Expended Authority1,700

4201Total Actual Resources collected   300

4119Other Appropriations Realized2,000

4610Allotments - realized resources300

4650Allotments - expired authority300

**YEAR 19X1** - **STATEMENTS**

PRIVATE Statement of Net Cost

6710Depreciation Exp 243

**Net Cost****$243**

Statement of Change in Net Position

Net Cost   243

Financing Sources

5700Appropriation used1,700

**Net Result of operation 1,457**

Unexpended Appropriation

3100    300

**Net Position Beginning of the Peirod       0**

**Net Position End of the Peirod$1,757**

Statement of financing

Obligation Incurred

4902Expended Auth - Pd1,700

**Total Obligations as Adjusted Nonbudget Res    1,700**

Costs Capitalized on the Balance Sheet

1750Equipment1,700

1759Accumulated Dep  ( 243)

**Total Resources that Do Not Fund Net Cost   1,457**

**Net Cost  $ 243**

**YEAR 19X2**

PRIVATE EVENT DESCRIPTION

ANNUAL APPROPRIATION 

(UNEXPIRED)

F3845 - PROCEEDS OF SALE, PERSONAL PROPERTY (CLEARING ACCOUNT)

A.  SALE OF PROPERTY **BEFORE** AN OBLIGATION OF REPLACEMENT PROPERTY HAS BEEN INCURRED

5) An agency receives appropriations and it is apportioned and allotted

**Proprietary**

 1010FBWT1,500  

3100Unexp App1,500

**Budgetary**

4119Other Appro Realiz1,500

4450Unapportioned auth ava1,500

4450Unapportioned auth ava1,500

4510Apportionment1,500

4510Apportionment1,500

4610Allotments1,500

6) The agency anticipates collection of $1,100 from a sale of property which is apportioned and allotted accordingly.

From Federal source$400

From NonFed source$700

**Proprietary**

 None

**Budgetary**

4070Anticipated coll for Fed400

4060Anticipated coll for Nonfed700

4450Unapp authority - ava1,100

4450Unapp authority - ava1,100

4510Apportionment400

4590Apportionment - unavailable700

4510Apportionment400

4610Allotments400

7) on 1/1/x2 the agency sold Equipment A for $380 and administrative determination has been made to acquire a replacement equipment. 

The sales proceed is deposited to the F3845- Sales proceeds, personal property, a clearing account, until money is needed to acquire a replacement property.

**Proprietary**

1010Fund bal w Treas380

1759Acc dep - equip  90

7210Loss on dis of asset130

1750Equipment600

5730Fin source trans out w/o reimb380

1010FBWT380

**Budgetary**

None - There is no budgetary impact because the cash is immediately transferred to the clearing  account

**Proprietary**

1010FBWT380

5720Fin source trans in w/o reimb380

**Budgetary**

None

8)To record obligation incurred for the Equipment X, a replacement property for $600 on 5/30/X2.

*The appropriate budget clearing account will be charged and the appropriation account will be credited when the obligation is subsequently incurred for the replacement property.*

**Proprietary**

1010FBWT380

5720Fin source trans-in w/o reimb380

**Budgetary**

4277Other actual coll - Fed380

4070Ant coll from Fed 380

4610Allotment600

4801Undelivered orders - unpd600

($380 from collections and $220 from appropriations)

**Proprietary**

5730Fin source trans out w/o reimb380

1010FBWT380

**Budgetary**

None

9) On 7/1/X2 agency used $380 from the sales proceeds of equipment and used an additional appropriation to buy equipment X, a replacement property for $600.

**Proprietary**

1750Equip600

1010FBWT600

3100Unexp220

5700App Used220

**Budgetary**

4801Undelivered ord - unpd600

4902Exp Auth - pd600

**Proprietary**

None

**Budgetary**

None

10) To record depreciation expense for equipment X for the year on 12/31/X2

Equipment X  $11/month

$11 x 6 = $66

**Proprietary**

6710Depreciation exp66

1759Acc depreciation - equip66

**Budgetary**

None

B.  SALE OF PROPERTY**AFTER** THE PURCHASE OF REPLACEMENT PROPERTY

11) On 7/1/X2  Equipment Y, a replacement property was purchased for $700.

**Proprietary**

1750Equip700

1010FBWT700

3100Unexp700

5700App Used700

**Budgetary**

4610Allotments700

4902Expended authority - pd700

12) To record depreciation expense for Equipment B for the year on  9/30/X2.

$5 x 9 = $45

**Proprietary**

6710Depreciation exp45

1759Acc depreciation - equip45

**Budgetary**

None

13)  On 9/30/X2 the agency sold Equipment B for $350.

**Proprietary**

1010Fund bal w Treas350

1759Acc dep - equip  90

1750Equipment400

7110Gain on disp of asset  40

**Budgetary**

4266Other actual coll - Nonfed350

4060Anticip Nonfed coll300

4590Apportionment - unavaliable350

4610Allotments350

14) At the end of the year, depreciation expense for Equipment Y was recorded.

Equipment Y $15/month

$15 x 6 = $90

**Proprietary**

6710Depreciation exp90

1759Acc depreciation - equip90

**Budgetary**

None

PRIVATE EVENT DESCRIPTION

ANNUAL APPROPRIATION 

(UNEXPIRED)

F3845 - PROCEEDS OF SALE, PERSONAL PROPERTY (CLEARING ACCOUNT)

TREASURY MISCELLANEOUS RECEIPTS (GENERAL FUND)

C.  THE REPLACEMENT PROPERTY WAS **NOT ACQUIRED**

15)  To record depreciation expense for Equipment C for the year on 6/30/X2.

$12 x 6 = $72

**Proprietary**

6710Depreciation exp72

1759Acc depreciation - equip72

**Budgetary**

None

16)   The agency sold the Equipment C on (7/01/X2). 

**Proprietary**

1010FBWT400

1759Acc dep 180

7210Loss 120

1750Equipment700

5730Trans out w/o reim400

1010FBWT400

**Budgetary**

None - There is no budgetary impact because the cash is immediately transferred to the clearing  account

**Proprietary**

5720Trans in400

1010FBWT400

**Budgetary**

None

17)  The agency determined that the replacement property will not be acquired and the receipt will be returned to Treasury miscellaneous receipt account.  (this would also apply to the agency that does not replace the property within the prescribed time limit). 

**Proprietary**

None

**Budgetary**

None

**Proprietary**

5730Trans out400

1010FBWT400

**Budgetary**

None

**Proprietary**

1010FBWT400

5720Trans in400

**Budgetary**

N/A

**YEAR 19X2**Preclosing Trial Balance and Closing Entries

PRIVATE **Proprietary**

**Budgetary**

Preclosing Trial Balance

Preclosing Trial Balance

1010Fund Balance with Treasury1,230

1750Equipment1,300

1759Accumualted Depreciation    156

3100Unexpended Appropriation     880

3310Cumulative Results1,457

5700Appropriation Used   920

5720Fin Source Transfer in1,160

5730Fin Source Transfer out1,560

6710Depreciation expense   273

7110Gain on Disosition of Assets    40

7210Losses on Disposition of Assets   250                           

$4,613 $4,613

4060Anticipated Collections from Nonfed   350

4070Anticipated Collections from Fed     20

4119Other Appropriations Realized1,500

4266Other Actual Collections - Nonfed   350

4277Other Actual Coll - Fed   380

4590Apportionments - Unavailable   350

4610Allotments - Realized Resources   950

4902Expended Authority - Paid                             1,300

$2,600$2,600

Closing Entries

Closing Entries

7110Gains on Disposition of Assets     40

5720Fin Sources Trans in w/o Reimb1,160

5700Appropriations Used   920

3310Cumulative results2,120

3310Cumulative results    2,083

5730Fin Sources Trans out w/o Reimb1,560

6710Depreciation Expense   273

7210Losses on Disposition of Assets   250

4902Expended Authority1,300

4201Total Actual Resources collected        930

4119Other Appropriations Realized1,500

4266Other Actual Coll - Nonfed    350

4277Other Actual Coll - Fed     380

4590Apportionments - Unavaliable   950

4610Allotments - realized resources   350

4650Allotments - expired authority 930

4060Anticipated Collections from Nonfed 350

4070Anticipated Collections from Fed     20

**YEAR 19X2**   -   **STATEMENTS**

PRIVATE Statement of Net Cost

6710Depreciation Exp273

7110Gains on disposition of asset(40)

7210Losses on disposition of asset250 

**Net Cost****$483**

Statement of Change in Net Position

Net Cost   483

Financing Sources

5700Appropriation used    920

5720Fin Sources Trans in 1,160

5730Fin Sources Trans out(1,560)

**Net Result of operation      37**

Increase in Unexpended appropriation

3100Unexpended app    580

**Change in Net Position****617**

Net Position - Beginning of the Period

3100Unexpended Appropriation     300

3310Cumulative Results of Operation  1,457

Net Position - End of the Period$2,374

Statement of Financing

Obligation Incurred

4902Expended Auth - Pd1,300

Less: Offsetting Collections

4266Other Actual coll - Nonfed  (350)

4277Other Actual coll - fed  (380)  

Transfer in5720 1,160

Transfer out5730(1,560)

**Total Obligations as Adjusted Nonbudget Res  170**

Costs Capitalized on the Balance Sheet

1750Equipment  (400)

1759Accumulated Dep  (  87)

**Total Resources that Do Not Fund Net Cost  313**

Net Cost$483

     � CFR 41, Chapter 101-43.001-23, Personal Property is defined as any property, except real property, records of the Federal Government, and naval vessels of the following categories: Battleship . . . . .

     � GAO Policy and Procedures Manual (Title VII) dated May 1993, pgs7.5-8,9, If the sales proceeds are received before an obligation for replacement property has been incurred, . . . . document such proceeds will be used as an appropriation reimbursement to apply against an obligation which will be incurred within the prescribed time limit, the proceeds should be credited to the appropriate budget clearing account . . . . .  The appropriate budget clearing account will be charged and the appropriation account will be credited when the obligation is subsequently incurred for the replacement property. 

	CFR 41, Chapter 101, section 101-46.304(a), When the property to be replaced is sold before the acquisition of the replacement property, the proceeds of such sales will be credited to the agencys account.

     � GAO Policy and Procedures manual dated May 1993, page 7.5-8, If the sales proceeds are received after and obligation for replacement property has been incurred and within the prescribed time limit, the proceeds may be credited as a direct reimbursement to the appropriation account charged or chargeable for the replacement property.

	CFR 41, Chapter 101, section 101-46.304 states  When the replacement property is sold after the acquisition of the replacement property, the proceeds of such sale may be deposited as a direct reimbursement credit to the appropriation previously charged for the replacement of similar items of personal property.

     � GAO Policy and Procedures Manual, dated May 1993, pg7.5-9, If the sales proceeds are not available for obligation or are not to be applied to replacement purchases, the proceeds will be deposited in the Treasury as miscellaneous receipts in the general funds.

	CFR 41, Chapter 101, section 101-46.304, Proceed of sales related to personal property for which an obligation for replacement has not been incurred during the period of availability following the date of sale, or sales proceeds which for other reasons an agency elects not to apply to replacement costs, shall be deposited to miscellaneous receipts account.