On April 1 of the Current Year,a Company Disposed of an Automobile

question 36

Essay

On April 1 of the current year,a company disposed of an automobile that had cost $20,000.The auto had a salvage value of $2,000 and a useful life of five years.The accounting records showed accumulated depreciation for this automobile of $8,100 as of April 1 of the current year.The asset was discarded after an accident occurred and $10,500 cash was received from an insurance claim.
Prepare the journal entry to record the disposal of the automobile.

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Definitions:

Net Income

The remaining earnings of a business following the deduction of all expenses and tax liabilities from its total revenue.

ROE

Return on Equity is a measure of financial performance calculated by dividing net income by shareholders' equity, indicating how well a company utilizes investments to generate earnings growth.

Current Ratio

The Current Ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, by comparing a company's current assets to its current liabilities.

Inventories

Assets consisting of goods available for sale to customers in the ordinary course of business.