Question

ells Company's delivery truck, with a cost of $56,000 was destroyed by fire. At the time of the fire, the balance of the Accumulated Depreciation account amounted to $38,000. The company received $32,000 reimbursement from its insurance company. The gain or loss as a result of the fire was

Answer 1

Answer:

The company will earn a gain of $14,000.

Explanation:

The original cost of the ells company's delivery truck was $ 56,000 and the accumulated depreciation account had a balance of $38,000, which means a provision for the $38,000 was made in case something bad happens to the truck, and it eventually did as the truck was destroyed by fire and hence the amount of $18,000 ($56,000 - $38,000) was left which was not covered by the company.

The company received $32,000 as insurance , which means the $18,000 loss would be covered here - $32,000 -$18,000 = $14,000, and also the company will gain $14,000.