A company had a tractor destroyed by fire. The tractor originally cost $131,000 with accumulated...

Marques Flynn

Marques Flynn

Answered

2022-12-05

A company had a tractor destroyed by fire. The tractor originally cost $131,000 with accumulated depreciation of $65,400. The proceeds from the insurance company were $26,000. The company should recognize: A.
A gain of $65,600.
B. A loss of $39,600.
C. A gain of $26,000.
D. A loss of $65,600.
E. A gain of $39,600.

Answer & Explanation

Reynaldo Hampton

Reynaldo Hampton

Expert

2022-12-06Added 8 answers

Original cost of the tractor = $131,000
Accumulated depreciation = $65,400
Book value of the tractor on the date of fire = Original cost - Accumulated depreciation = $131,000 - $65,400= $65,600
Proceeds from insurance company = $26,000
Gain / loss on disposal of tractor = Proceeds from insurance company - Book value of the tractor = $26,000 - $65,600 = -$39,600 (loss)
As the proceeds from Insurance company is less than the book value of the tractor, the company should recognise a loss of $39,600.
The correct answer is: A loss of $39,600.

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