Wells Company's delivery truck, which originally cost $70,000, was destroyed by fire. At the time of the fire, the balance of the Accumulated Depreciation account amounted to $47,500. The company received $40,000 reimbursement from its insurance company. Thegain or loss as a result of the fire wasa. $30,000 loss. b. $17,500 loss. c. $30,000 gain. d. $17,500 gain.

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Business

Evelin Blackwell

5 January, 04:01

Wells Company's delivery truck, which originally cost $70,000, was destroyed by fire. At the time of the fire, the balance of the Accumulated Depreciation account amounted to $47,500. The company received $40,000 reimbursement from its insurance company. Thegain or loss as a result of the fire wasa. $30,000 loss. b. $17,500 loss. c. $30,000 gain. d. $17,500 gain.

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Anna Rollins · Answer 1

D) $17,500 gain.

Explanation:

Wells Company should record the following transactions:

Dr Cash account 40,000 Dr Accumulated Depreciation Vehicles account 47,500 Cr Vehicle account 70,000 Cr Gain on Disposal account 17,500

$40,000 in cash was received and the accumulated depreciation balance should equal to zero, therefore they must be debited.

The vehicles account balance should equal zero and the rest is gain on disposal, therefore they must be credited.