Opaque Company Had Machinery Destroyed by a Flood on December

question 109

Multiple Choice

Opaque Company had machinery destroyed by a flood on December 23,2011.The machinery had been acquired on April 1,2009,for $69,000 and its adjusted basis was $14,200.The machinery was completely destroyed and Opaque received $30,000 of insurance proceeds for the machine and did not replace it.This was Opaque's only casualty or theft event for the year.As a result of this event,Opaque 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:

Sales Dollars

This refers to the total amount of revenue generated from the sale of goods or services, expressed in monetary terms.

Finished Goods Inventory

Finished goods awaiting sale that have not been sold yet.

Raw Materials Inventory

The total value of all the materials that have not yet been used in the production process.

Raw Materials Production

The initial stage in the manufacturing process, involving the extraction or creation of raw materials to be used in production.