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AICPA CPA-Financial Exam - Topic 1 Question 42 Discussion

Actual exam question for AICPA's CPA-Financial exam
Question #: 42
Topic #: 1
[All CPA-Financial Questions]

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?

Show Suggested Answer Hide Answer
Suggested Answer: C

Choice 'c' is correct. $730,000 gain reported as a separate component of income before extraordinary items.


by Graciela at May 09, 2022, 08:13 PM

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Marica
4 months ago
Really? That seems way too high for a gain.
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Isidra
4 months ago
Totally agree with the $780,000 figure!
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Rodolfo
4 months ago
Wait, how does the deductible affect this?
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Tamera
4 months ago
I think the gain should be $780,000.
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Tamra
5 months ago
The replacement cost is $1,100,000.
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In
5 months 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.
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Jerilyn
5 months 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.
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Alana
5 months 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?
upvoted 0 times
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