A Financial Accounting Question! Need help.?

Question

If an equipment was completely destroyed (involuntarily), and a salvage company disposed of the equipment free of charge, how would you record the disposal of equipment in regards to accumulated deprecation and original cost.

The accounts reflected this on the date of "sale" or disposal

Original Cost: 76,200
Residual Value 4,200
Estimated Life 15 years
Accumulated Deprecation (straight line) 57600 (12 years)

I don't know how to balance out the equation (a=l+e) on this one.

Thanks.

Answer 1

Credit equipment 76,200
Debit accumulated depr 57.600
Debit either receivable from insurance or casually loss for the difference.
Residual value and estimated life are red herrings.

Answer 2

Here's the entry:

(Dr) Casualty Loss ($76200-$57600) $18600
(Dr) Accumulated Depreciation 57600
(Cr) Equipment $76200

If there is a salvage value of the equipment (since you did not mention it here), deduct the cash from the loss and record the loss. Example, a scrap was sold for $17000.

(Dr) Cash $17000
(Dr) Casualty Loss 1600
(Dr) Accumulated Deprecition 57600
(Cr) Equipment

If the cash received is more than the book value, record a gain.