Question

A state government condemned Epirus Co.'s parcel of real estate. Epirus will receive $1,500,000 for this property, which has a carrying amount of $1,150,000. Epirus incurred the following costs as a result of the condemnation:Appraisal fees to support a $1,500,000 value$5,000 Attorney fees for the closing with the state 7,000Attorney fees to review contract to acquire replacement property 6,000 Title insurance on replacement property 8,000. What amount of cost should Epirus use to determine the gain on the condemnation?

A.$1,162,000
B.$1,164,000
C.$1,168,000
D.$1,176,000

Answer 1

The cost that Epirus Co. should use to determine the gain on the condemnation is A. $1,162,000.

Step-by-step explanation:

Epirus Co. should use the carrying amount of the property plus the necessary costs to determine the gain on the condemnation. In this case, the carrying amount of the property is $1,150,000.

The necessary costs include the appraisal fees, attorney fees for closing with the state, and attorney fees to review the contract to acquire replacement property.

Therefore, the total cost to determine the gain on the condemnation is $1,162,000 ($1,150,000 + $5,000 + $7,000 + $6,000 = $1,162,000).