Blossom Inc. recently replaced a piece of automatic equipment at a net price of $3,500, f.o.b. factory. The replacement was necessary because one of Blossom’s employees had accidentally backed his truck into Blossom’s original equipment and made it inoperable. Because of the accident, the equipment had no resale value to anyone and had to be scrapped. Blossom’s insurance policy provided for a replacement of its equipment and paid the price of the new equipment directly to the new equipment manufacturer, minus the deductible amount paid to the manufacturer by Blossom. The $3,500 that Blossom paid was the amount of the deductible that it has to pay on any single claim on its insurance policy. The new equipment represents the same value in use to Blossom. The used equipment had originally cost $64,000. It had a book value of $45,000 at the time of the accident and a second-hand market value of $50,000 before the accident, based on recent transactions involving similar equipment. Freight and installation charges for the new equipment cost Blossom an additional $800 cash. (a) Prepare the general journal entry to record the transaction to replace the equipment that was destroyed in the accident. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit List of Accounts

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Blossom Inc. recently replaced a piece of automatic equipment at a net price of $3,500, f.o.b. factory. The replacement was necessary because one of Blossom’s employees had accidentally backed his truck into Blossom’s original equipment and made it inoperable. Because of the accident, the equipment had no resale value to anyone and had to be scrapped. Blossom’s insurance policy provided for a replacement of its equipment and paid the price of the new equipment directly to the new equipment manufacturer, minus the deductible amount paid to the manufacturer by Blossom. The $3,500 that Blossom paid was the amount of the deductible that it has to pay on any single claim on its insurance policy. The new equipment represents the same value in use to Blossom. The used equipment had originally cost $64,000. It had a book value of $45,000 at the time of the accident and a second-hand market value of $50,000 before the accident, based on recent transactions involving similar equipment. Freight and installation charges for the new equipment cost Blossom an additional $800 cash.

(a)

Prepare the general journal entry to record the transaction to replace the equipment that was destroyed in the accident. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit

List of Accounts

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