Question

Juan's business delivery truck is destroyed in an accident. He paid $40,000 for the truck, and $30,000 of depreciation has been deducted during its period of use. The insurance company paysJuan $32,000 due to the accident. What is the minimum amount that Juan must spend on a newtruck to avoid any gain recognition?

Answer 1

$32,000

Step-by-step explanation:

Data provided in the question

Paid amount for the truck = $40,000

Depreciation deductible amount = $30,00

Paid amount due to the accident = $32,000

So by considering the above information, the minimum amount that Juan must spend to avoid any gain recognition is $32,000 i.e payment amount due to the accident which reflects the proceeds from the insurance company