In February 2018, the Storage Building Used in Amelia's Business

question 53

Multiple Choice

In February 2018, the storage building used in Amelia's business is damaged by a windstorm. It had an adjusted basis of $150,000 at that time. Due to changing insurance companies, the building had been appraised recently, with a resulting FMV of $200,000. After the storm, the building appraised at $120,000. Amelia has received no insurance reimbursement by December 31, but expects to recover 90 percent of the loss. In the subsequent year, the insurance company pays Amelia $50,000. Amelia's AGI is $85,000 in 2018, and her 2019 AGI is $80,000. Amelia suffers no other casualty losses in either year. Amelia may deduct

• A) $30,000 loss in 2018 and $0 in 2019.
• B) $8,000 loss in 2018 and $22,000 loss in 2019.
• C) $0 loss in 2018 and $30,000 loss in 2019.
• D) $80,000 loss in 2018 and $50,000 gain in 2019.

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Definitions:

Bonds

Long-term debt instruments issued by corporations or governments to raise capital, with the issuer promising to pay back the principal along with interest on specified dates.

Annual Interest Payment

the amount of money paid in interest to lenders or bondholders over the course of a year.

Accounting Period

A specific period of time covered by financial statements, usually a fiscal quarter or year.

Journal Entry Grid

A tool used in accounting to visually organize and record the debits and credits of transactions.