Judy Purchased a Property and Built a Building on It

question 35

Essay

Judy purchased a property and built a building on it at a cost of $200,000. She purchased fire insurance on the building in the sum of $150,000. A fire caused $150,000 damage to the building. Under normal circumstances would Judy be able to recover the full amount of the loss? Give reasons for your answer.

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Definitions:

Premium Wheat

Refers to wheat that is of higher quality than standard wheat, often meeting certain criteria for size, condition, and protein content, and therefore commands a higher price in the market.

Cost Recovery Method

An accounting technique used when the future collectibility of revenue is uncertain, recognizing revenue only when cash payments are received.

Revenue Recognition

An accounting guideline that specifies when revenue should be recognized and recorded.

Installment Sales Method

An accounting method used to recognize revenue from sales when payments are received in installments over a period of time, instead of at the point of sale.