Question

A company had a tractor destroyed by fire. The tractor originally cost $142,000 with accumulated depreciation of $75,300. The proceeds from the insurance company were $37,000. The company should recognize:

Answer 1

Answer:

The company should recognize a loss of 29600$ on this economic event.

Explanation:

The company tractor costing 142000$ having net book value of 66700$ was destroyed by fire. The future economics benifts that company can take from this was equal to NBV i.e. 66,700 $. So this was company loss however proceed from insurance company mitigate this loss from 66700$ to 29700$ (66700$-37000$).

Entry company will make in his book in under.

Credit Asset Tractor   142000$

Debit Loss                   29700$

Debit Cash                   37000$

Debit Ac Dep               75300$