Orange Company Had Machinery Destroyed by a Fire on December

question 44

Multiple Choice

Orange Company had machinery destroyed by a fire on December 23,2016.The machinery had been acquired on April 1,2014,for $49,000 and its adjusted basis was $14,200.The machinery was completely destroyed and Orange received $30,000 of insurance proceeds for the machine and did not replace it.This was Orange's only casualty or theft event for the year.As a result of this event,Orange has:

• A)$4,200 ordinary loss.
• B)$15,800 § 1245 recapture gain.
• C)$14,200 § 1245 recapture gain.
• D)$30,000 § 1231 gain.
• E)None of the above.

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Definitions:

Present Value

The current value of a future sum of money or stream of cash flows, given a specific rate of return.

Discount Rate

During discounted cash flow analysis, this is the rate employed to determine the present value of anticipated future cash flows.

Cash Flows

The total amount of money being transferred into and out of a business, often used as an indicator of a company's financial strength.

Discount Rate

The discount rate employed in discounted cash flow analysis to ascertain the present worth of future cash flows.