On January 1 of the current year, the records of Khouri Corporation showed the following regarding a truck: Equipment (estimated residual value, $8,200) Accumulated depreciation (straight-line, three years) $ 23,600 6,600 On December 31 of the current year, the delivery truck was a total loss as the result of an accident. Required: 1. Based on the data given, compute the estimated useful life of the truck. 2. Prepare all journal entries with respect to the truck on December 31 of the current year, assuming there was no insurance coverag on the truck. 3. Assuming Khouri had casualty insurance on the truck and received $10,500 from the insurance company for the accident, determine whether there was a gain or loss for the disposal and what the associated amount was.

On January 1 of the current year, the records of Khouri Corporation showed the following regarding a truck: Equipment (estimated residual value, $8,200) Accumulated depreciation (straight-line, three years) $ 23,600 6,600 On December 31 of the current year, the delivery truck was a total loss as the result of an accident. Required: 1. Based on the data given, compute the estimated useful life of the truck. 2. Prepare all journal entries with respect to the truck on December 31 of the current year, assuming there was no insurance coverag on the truck. 3. Assuming Khouri had casualty insurance on the truck and received $10,500 from the insurance company for the accident, determine whether there was a gain or loss for the disposal and what the associated amount was.

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FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

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E8-18 (Algo) Inferring Asset Age and Recording Accidental Loss on a Long-Lived Asset (Straight-Line
Depreciation) LO8-3, 8-5
On January 1 of the current year, the records of Khouri Corporation showed the following regarding a truck:
Equipment (estimated residual value, $8, 200)
Accumulated depreciation (straight-line, three years)
$ 23,600
6,600
On December 31 of the current year, the delivery truck was a total loss as the result of an accident.
Required:
1. Based on the data given, compute the estimated useful life of the truck.
2. Prepare all journal entries with respect to the truck on December 31 of the current year, assuming there was no insurance coverag
on the truck.
3. Assuming Khouri had casualty insurance on the truck and received $10,500 from the insurance company for the accident,
determine whether there was a gain or loss for the disposal and what the associated amount was.
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