To record the asset disposal of the machine that was totally destroyed in a fire, and the insurance company settled the claim for Tk. 20,000 cash, the journal entry will be as follows:
Journal Entry:
| Date | Account Titles | Debit (Tk) | Credit (Tk) |
|---|---|---|---|
| [Date] | Insurance Receivable (or Cash) | 20,000 | |
| Loss on Asset Disposal | [Machine’s Book Value] | ||
| Accumulated Depreciation (if any) | [Accumulated Depreciation] | ||
| Machine (Asset) | [Machine’s Book Value] |
Explanation:
- Debit Insurance Receivable (or Cash): Tk. 20,000, to record the insurance settlement.
- Debit Loss on Asset Disposal: This is the difference between the book value of the machine and any insurance proceeds received.
- Debit Accumulated Depreciation: If applicable, to remove the accumulated depreciation of the machine from the books.
- Credit Machine (Asset): The machine is removed from the books at its original cost (book value).
Make sure to replace the values with the actual figures for the machine’s book value and accumulated depreciation, if applicable.
