MENU
Ocean Corp.'s comprehensive insurance policy allows its assets to be replaced at current value. The policy has a $50,000 deductible clause. One of Ocean's waterfront warehouses was destroyed in a winter storm. Such storms occur approximately every four years. Ocean incurred $20,000 of costs in dismantling the warehouse and plans to replace it. The tax rate is 30%. The following data relate to the warehouse:
Current carrying amount $ 300,000
Replacement cost 1,100,000
What amount of gain should Ocean report as a separate component of income before extraordinary items?
Suggested Answer: C
Get Premium CPA-Financial Questions
as Interactive Web-Based Practice Test or PDF
Real Exam Format
Detailed Explanations
Instant Access
Get Your Practice Test
Choice 'c' is correct. $730,000 gain reported as a separate component of income before extraordinary items.
8 comments · newest first
MA
Marica
11 months ago
Really? That seems way too high for a gain.
IS
Isidra
12 months ago
Totally agree with the $780,000 figure!
RO
Rodolfo
12 months ago
Wait, how does the deductible affect this?
TA
Tamera
12 months ago
I think the gain should be $780,000.
TA
Tamra
1 year ago
The replacement cost is $1,100,000.
IN
In
1 year ago
Hmm, I'm not totally sure about this one. I'll have to think it through carefully and try to eliminate the options that don't seem relevant.
JE
Jerilyn
1 year ago
Hmm, I'm not totally sure about this one. I guess the lighting issue or the font problem could potentially be security-related, but I'm not confident about that. I'll have to think it through more carefully.
AL
Alana
1 year ago
I think "numerical sampling" sounds familiar, but I can't recall if that's a recognized method. Maybe it's more about sampling for variables?