On January 3, 2007, Alton Corp

question 95

Multiple Choice

On January 3, 2007, Alton Corp.owned a machine that had cost $200,000.The accumulated depreciation was $120,000, estimated salvage value was $12,000, and fair market value was $320,000.On January 4, 2007, this machine was irreparably damaged by Reed Corp.and became worthless.In October 2007, a court awarded damages of $320,000 against Reed in favor of Alton.At December 31, 2007, the final outcome of this case was awaiting appeal and was, therefore, uncertain.However, in the opinion of Alton's attorney, Reed's appeal will be denied.At December 31, 2007, what amount should Alton accrue for this gain contingency?

• A)$320,000.
• B)$260,000.
• C)$200,000.
• D)$0.

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Definitions:

Resource Prices

Refers to the costs associated with inputs used in the production of goods or services, such as raw materials, labor, and capital.

Market Demand

The total quantity of a product or service that all consumers in a market are willing and able to purchase at various prices.

Increases

This term refers to a situation where a quantity or quality of something goes up or becomes more.

Constant-Cost Industry

An industry where the costs of production do not change as the overall level of production increases or decreases.