Business Casualty Losses One of your client BC LLC bought an apartment complex o
ID: 2465226 • Letter: B
Question
Business Casualty Losses
One of your client BC LLC bought an apartment complex on 01/01/2004. Total Cost of apartment including land was $8,726,210. Accumulated Depreciation as of 12/31/2014 was 4,513,597. BC refinanced the entire loan in 2009. Loan origination cost in 2009 was 333,777 and as of 12/31/2014 accumulated loan amortization was 109,934. Mortgage balance on 12/31/2014 was 3, 689,932.
On June 1, 2015 Tornedo hit the apartment complex and caused a considerable damage. Half the units became inhabitable. BC returned the security deposits of the tenants and the tenants moved out. Only half of the units are rented out since July 1, 2015.
The insurance company so far has paid $2.5 million in 2015. The insurance company is coming back in 2016 to determine the amount of loss. BC does not know when insurance company will settle the case.
Required:
How to account for $2.5 million payment from Insurance Company
How and when to claim expenses for environmental cleanup and asbestos removal
How much depreciation to claim in 2015
Explanation / Answer
The insurance claim should be credited to the loss on damage to buildings. The cleanup expenses should claimed from the insurance company once the same is incurred. Depreciation should be claimed on the full building till tornedo hit and subsequently on 50% of the building
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.