A Factory Building Owned by Amber, Inc

question 48

Multiple Choice

A factory building owned by Amber, Inc.is destroyed by a hurricane.The adjusted basis of the building was $400,000 and the appraised value was $425,000.Amber receives insurance proceeds of $390,000.A factory building is constructed during the nine-month period after the hurricane at a cost of $450,000.What is the recognized gain or loss and what is the basis of the new factory building?

• A)$0 and $450,000.
• B)$0 and $460,000.
• C)($10,000) and $440,000.
• D)($10,000) and $450,000.

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Definitions:

Estimated

An approximate calculation or judgment of the value, number, quantity, or extent of something.

Workers' Compensation

Coverage that delivers healthcare benefits and substitutes income for workers injured during their employment tasks.

Premium Cost

The additional amount paid over the normal cost for something, often for insurance or for acquiring a financial instrument before maturity.

Internal Control

Systems and processes implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.