A truck costing $110000 was destroyed when its engine caught fire. At the date of the fire the accumulated depreciation on the truck was $50000. An insurance check for $125000 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 $15000.
B) credit to the Truck account of $60000.
C) credit to the Accumulated Depreciation account for $50000.
D) Gain on Disposal of $65000.

Question

Quizplus · Accepted Answer

The gain on disposal is calculated as the insurance proceeds ($125,000) minus the book value of the truck ($110,000 - $50,000 = $60,000), resulting in a gain of $65,000.

A Truck Costing $110000 Was Destroyed When Its Engine Caught