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.

Identify different types of adjusting entries and their impact on financial statements.

Comprehend the consequences of failing to make necessary adjusting entries.

Distinguish between different types of revenues and how they are recognized.

Understand the concept of accrued expenses and revenues and how to adjust for them.

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Definitions:

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Infection caused by the roundworm Trichinella spiralis.

Nematocysts

Specialized cells in the tentacles of cnidarians such as jellyfish, used for capturing prey and defense through the release of toxins.

Cnidarian

Invertebrates existing as either a polyp or medusa, with two tissue layers and radial symmetry.

Muscle and Nerve Fibers

Specialized cells within the body, muscle fibers responsible for contraction and motion, and nerve fibers responsible for transmitting electrical impulses.