A machine costing $176,000 was destroyed when it caught fire.At the date of the fire, the accumulated depreciation on the machine was $80,000.An insurance check for $200,000 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
A)gain on disposal of $24,000.
B)credit to the Equipment account for $120,000.
C)credit to the Accumulated Depreciation account for $80,000.
D)gain on disposal of $104,000.

Question

Quizplus · Accepted Answer

The gain on disposal is calculated as the insurance proceeds ($200,000) minus the book value of the machine ($176,000 - $80,000 = $96,000), resulting in a gain of $104,000.

A Machine Costing $176,000 Was Destroyed When It Caught Fire