Equipment costing $280,000 was destroyed when it caught on fire.At the date of the fire, the accumulated depreciation on the equipment was $112,000.An insurance check for $320,000 was received based on the replacement cost of the equipment.The entry to record the insurance proceeds and the disposition of the equipment will include a
A)gain on disposal of $40,000.
B)credit to the Equipment account of $168,000.
C)credit to the Accumulated Depreciation account for $112,000.
D)gain on disposal of $152,000.

Question

Quizplus · Accepted Answer

The gain on disposal is calculated as the insurance proceeds ($320,000) minus the book value of the equipment ($280,000 - $112,000 = $168,000), resulting in a gain of $152,000.

Equipment Costing $280,000 Was Destroyed When It Caught on Fire