On July 1, Phoenix Corporation, a calendar-year company, received a condemnation award of $150,000 as compensation for the forced sale of a plant located on company property that stood in the path of a new highway. On this date, the plant building had a depreciated cost of $75,000 and the land cost was $25,000. On October 1, Phoenix purchased a parcel of land for a new plant site at a cost of $62,500. Ignoring income taxes, Phoenix should report in its income statement for the year ended December 31 a gain of
A) $0.
B) $12,500.
C) $37,500.
D) $50,000.

Question

Quizplus · Accepted Answer

The gain is calculated as the condemnation award ($150,000) minus the depreciated cost of the plant building ($75,000) and the land cost ($25,000), resulting in a gain of $50,000. The purchase of new land does not affect the gain calculation.

On July 1, Phoenix Corporation, a Calendar-Year Company, Received a Condemnation