Equipment costing $280000 was destroyed when it caught on fire.At the date of the fire the accumulated depreciation on the equipment was $112000.An insurance check for $320000 was received based on the replacement cost of the equipment.Recording the insurance proceeds and the disposition of the equipment will include a(n)
A)gain on disposal of $40000.
B)decrease to Equipment of $168000.
C)increase to Accumulated Depreciation for $112000.
D)gain on disposal of $152000.

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 $280000 Was Destroyed When It Caught on Fire