Last week, we discussed on how to record a payment on a claim. We looked at a scenario of when your building caught on fire, and you loss all of your inventory. We booked a 100% value of your inventory, and then we booked a loss on your inventory.
Today, allow me discuss on how to record a loss of your delivery vehicle when accumulated depreciation is applied.
You bought your delivery vehicle for $25,000. You expect the useful life of your delivery vehicle to last five years. The accumulated depreciation would be $5,000 per year that will need to be expensed.
The amount that you expect to be paid by your insurance company is $2,500. How would you record your entry?
Debit - Insurance Asset: $2,500
Debit - Accumulated Depreciation: $5,000
Debit - Loss: $2,500
Credit - Delivery Vehicle (asset): $10,000
After 30 days, you received a not so nice check from your insurance carrier. How would you record that entry?