An Apartment Building with an Adjusted Basis of $500,000 Was

question 28

Multiple Choice

An apartment building with an adjusted basis of $500,000 was destroyed by a tornado on April 30,2014.On May 10,2014,the insurance company paid the owner $695,000.The owner reinvested $570,000 in a new apartment complex.What is the basis of the new complex if non-recognition of gain from an involuntary conversion is elected?

• A) $500,000.
• B) $570,000.
• C) $625,000.
• D) $695,000.

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Definitions:

Direct Labor Rate Variance

The difference between the actual cost of direct labor and the expected (or standard) cost, used as a measure of performance in variance analysis.

Actual Rate

The actual interest rate or return that is earned or paid on an investment, loan, or other financial product.

Standard Rate

A predetermined or fixed cost rate that is applied uniformly across units, activities, or time for budgeting or billing purposes.

Unfavorable Cost Variance

A variance that occurs when the actual cost exceeds the standard cost.