A Company Had a Building Destroyed by Fire

question 163

Essay

A company had a building destroyed by fire. The building originally cost $650,000, and its accumulated depreciation as of the date of the fire was $300,000. The company received $400,000 cash from an insurance policy that covered the building and will use that money to help rebuild. Prepare the single journal entry to record the destruction of the building and the receipt of cash from the insurance company.

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Definitions:

Operating Profit

The profit earned from a firm's core business operations, excluding deductions of interest and tax, as well as any non-operational income and expenses.

Loss

A financial situation where expenses exceed revenues.

Pension Expense

The total cost recognized by an employer for an accounting period regarding the company’s pension plan, comprising service costs, interest costs, plan amendments, and other factors.

Operating Segments

Components of an enterprise that engage in business activities earning revenues and incurring expenses, whose operational results are regularly reviewed by the entity's chief operating decision maker.