Question

A machine costing $132,000 was destroyed when it caught fire. At the date of the fire, the accumulated depreciation on the machine was $60,000. An insurance check for $150,000 was received based on the replacement cost of the machine. The entry to record the insurance proceeds and the disposition of the machine will include a

Answer 1

Answer:

Gain on disposal of $78,000

Explanation:

The computation of the disposition of the machine is shown below:e

= accumulated depreciation + insurance received based on the replacement cost of the machine - Destroyed cost of the machine  

= $60,000 + $150,000 -  $132,000  

= $78,000

Since the machine was replaced so accumulated depreciation should be included and the destroyed cost of the machine should be deducted.

The $78,000 record gain disposal of the machine