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A company had a tractor destroyed by fire. The tractor originally cost $143,000 with accumulated depreciation of $76,200. The proceeds from the insurance company were $38,000. The company should recognize_______________.

Respuesta :

Edufirst

Answer:

  • The company should recognize a loss of    $28,800.  

Explanation:

The book value of the tractor was the original cost of $143,00 less the accumulated depreciation of $76,200:

  • $143,000 - $76,200 = $66,800

Since the tractor was destroyed by fire, the asset must be removed from inventory by bringing its book value to zero, i.e. subtracting $66,800.

Since the insurance company reimbursed $38,000, the company must declare proceeds for $38,000.

The net change is:

  • $38,000 - $66,800 = - $28,800.

That is a loss of $28,800.

Therefore, the company should recognize a loss of $28,800.

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