- This topic has 1 reply, 2 voices, and was last updated 11 years ago by
.
- Posts
hi Sir,
2) On 1 October 2009 an office building owned by Problematic Ltd was damaged by a fire. The indexed cost of the
office building on that date was £169,000. The company received insurance proceeds of £36,000 on
10 October 2009, and spent a total of £41,000 during October 2009 on restoring the office building.
Problematic Ltd has made a claim to defer the gain arising from the receipt of the insurance proceeds. The office
building has never been used for business purposes.
i dont undestand how is there no disposal proceeds on the receipt of insurance proceeds and how the indexed base cost to be carried foward will be calculated?
thanksAs the insurance proceeds have been fully used to restore the asset an election may be made to avoid the normal part disposal gain calculation and instead deduct the proceeds from the cost of the asset. The restoration costs incurred will then be added to the base cost. The revised cost would therefore be 169,000 – 36,000 + 41,000 = 174,000
- You must be logged in to reply to this topic.