On July 1,Toucan 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,Toucan purchased a parcel of land for a new plant site at a cost of $62,500.Ignoring income taxes,Toucan 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 sum of the depreciated cost of the plant building ($75,000) and the land cost ($25,000), which equals $50,000. The purchase of a new plant site does not affect the calculation of the gain.

On July 1,Toucan Corporation,a Calendar-Year Company,received a Condemnation Award of $150,000