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    Dispositions, Including Condemnation, and Demolition

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    Presented below is a schedule of property dispositions for Frank Thomas Co.

    Schedule of Property Dispositions

    Cost Accumulated Cash Fair Market Nature
    Depreciation Proceeds Value of Disposition

    Land 40,000 -- 31,000 31,000 Condemnation

    Building 15,000 -- 3,600 --- Demolition

    Warehouse70,000 11,000 74,000 74,000 Fire Destruct

    Furniture 10,000 7,850 -- 3,100 Contribution

    Automobile 8,000 3,460 2,960 2,960 Sale

    The following additional information is available.

    Land
    On February 15, a condemnation award was received as consideration for unimproved land held primarily as an investment, and on March 31, another parcel of unimproved land to be held as an investment was purchased at a cost of $35,000

    Building
    On April 2, land and building were purchased at a total cost of $75,000, of which 20% was allocated to the building on the corporate books. The real estate was acquired with the intention of demolishing the building, and this was accomplished during the month of November. Cash proceeds received in November represent the net proceeds from demolition of the building.

    Warehouse
    On June 30, the warehouse was destroyed by fire. The warehouse was purchased January 2, 1995, and had depreciated $11,000. On December 27, the insurance proceeds and other funds were used to purchase a replacement warehouse at a cost of $90,000.

    Furniture
    On August 15, furniture was contributed to a qualified charitable organization. No other contributions were made or pledged during the year.

    Automobile
    On November 3, the automobile was sold to Ozzie Guillen, a stockholder.

    INSTRUCTIONS
    Indicate how these items would be reported on the income statement of Frank Thomas Co.

    NOTE: The answer should include the type of gain or loss, how any gain or loss is treated on the financial statements, and any relevant calculations. No need for entries. Just explain how each of the losses/gains should be treated on the financial statements, and don't forget to show any calculations.

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    Solution Summary

    Dispositions, including condemnation and demolitions are examined.

    $2.19

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