A Factory Building Owned by Amber, Inc

question 20

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.
• E) None of the above.

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Definitions:

Cash Dividends

Payments made by a corporation to its shareholder members from its earnings or reserves.

Net Cash

The amount of cash a company has on hand after all debts and liabilities have been paid.

Investing Activities

Financial actions related to the acquisition and disposal of long-term assets and other investments not considered as cash equivalents.

Cash Dividends

Dividends paid to shareholders by a corporation, ordinarily from its profit earnings.