A fiRe Destroyed Carl Cramer's Business Automobile

question 52

Multiple Choice

A fire destroyed Carl Cramer's business automobile. Carl originally paid $24,000 for the automobile and up to the time of the fire had been allowed $15,000 in depreciation. Within three months the insurance company replaced the old automobile with a new one which was worth $21,000. What is the basis of the new automobile for purposes of computing depreciation?

• A) $3,000
• B) $9,000
• C) $15,000
• D) $21,000
• E) $24,000

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Definitions:

Disclosure

The act of providing important information to stakeholders, required by regulations to ensure transparency and fairness in financial reporting and corporate actions.

Bank Reconciliation

The process of matching and comparing figures from the accounting records against those presented on a bank statement to ensure accuracy and consistency in the accounts.

Adjusted Balance

Represents the account balance after adjustments such as payments, credits, and interest have been factored in.

Journalize

Journalize refers to the process of recording financial transactions in the journal of an accounting system, which includes detailing debits and credits for each transaction.