A retailerrsquos store is destroyed by a tornado but is


A retailer’s store is destroyed by a tornado, but is insured for its replacement cost. Consequently, the retailer has a $40,000 gain after receiving the insurance proceeds. The store is not replaced because the retailer spends the insurance proceeds on additional inventory. What is the nature of the gain if the store originally cost $100,000 three years ago and had an adjusted basis of $82,000 at the time of its destruction?

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Financial Accounting: A retailerrsquos store is destroyed by a tornado but is
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