QUESTION 6 A Fruck costing $88,000 was destroyed when its engine caught fire. At

Question

QUESTION 6 A Fruck costing $88,000 was destroyed when its engine caught fire. At the date of the fire, the accumulated depreciation on the truck was $40,000. An insurance check for $100,000 was received based on the replacement cost of the truck. The entry to record the insurance proceeds and the disposition of the truck will include a A. Gain on Disposal of $52,000. OB. credit to the Truck account of $48,000. C. credit to the Accumulated Depreciation account for $40,000. O D. Gain on Disposal of $12,000.

Explanation / Answer

Journal entry on disposition of truck :

so answer is a) Gain on disposal $52000

Date accounts & explanation debit credit Bank a/c 100000 Accumlated depreciation 40000       Gain on disposal of assets 52000       Truck a/c 88000 (To record disposal of truck)

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