Question

ching assistants (TAs) are also available to help students with graded and ungraded quiz questions. Question 10 0.5 pts Banana Company paid $200,000 for a machine a few years ago. This year, the machine was completely destroyed in a fire. At the date of the fire, the accumulated depreciation on the machine was $80,000. An insurance check for $100,000 was received as a result of the fire. No journal entry for the casualty was recorded until Banana Company received the check from the insurance company. Banana Company's entry to record the insurance proceeds will include a gain on disposal of plant assets of $20,000. credit to the Accumulated Depreciation account for $80,000. credit to the Equipment account for $120,000. credit to the Cash account for $20,000. loss on disposal of plant assets of $20,000. Next > Previous

Answer 1

Purchase price of machine Less: Accumulated depreciation on machine Value of Machinery as on the date of fire Less: Claim from insurance company Loss on disposal of Plant $ $ $ $ $ 2,00,000.00 80,000.00 1,20,000.00 1,00,000.00 20,000.00 Credit Journal Entry of the above transaction General Journal Debit Insurance Company $1,00,000.00 Loss on disposal of Machine $ 20,000.00 Accumulated Depreciation Machinery Account (To disposal of Machinery destroyed) $ 2,00,000.00 Credit Journal Entry of the above transaction General Journal Debit $ 1,00,000.00 Insurance compnay (To settlement from inusrance company) Cash $ 1,00,000.00 Thus, last option is the correct answer, i.e, Loss on disposal of plant and Asset of $20000 Reason for not other options: 1 Gain on disposal of Plant Assets - There is no gain, there is a loss of $20000 on machine 2 credit to Acccumulated dep for $80000- Accumulated Dep is debited by $80000 3 credit to Equipment account $120000-Equipment should be credited with full value if $200000 4 Credit to the cash account for $20000 - cash is Debited with $100000

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