A Flood Destroys Owen's Building That Cost $100,000 in 2009,which

question 38

Multiple Choice

A flood destroys Owen's building that cost $100,000 in 2009,which has an adjusted basis of $80,000.Owen's insurance company reimburses him $125,000 for his loss.Owen promptly reconstructs the building for $115,000.What is the minimum amount of gain that Owen must recognize and his basis in the new building?
​
Recognized New
Gain Basis

• A)$-0- $80,000
• B)$-0- $115,000
• C)$10,000 $80,000
• D)$10,000 $115,000
• E)$10,000 $150,000

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Definitions:

Average Collection Period

The average number of days it takes for a company to collect payments from its customers, a measure of the efficiency of its credit policies.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets.

Quick Ratio

A measure of a company's short-term liquidity, calculated as (Current Assets - Inventory) / Current Liabilities, indicating how well a company can meet its short-term financial liabilities.

Days' Sales in Inventory

A financial metric that estimates how long it takes for a company to turn its inventory into sales.