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Dispositions, Including Condemnation, and Demolition

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.

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

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.

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.

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

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

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.

Solution Summary

Dispositions, including condemnation and demolitions are examined.