Equipment was stolen from Far East Corp. on May 1, 2017. The cost of the equipment was$10,000 and the UCC was $7,500. The insurance proceeds of $12,000 were received on September 15, 2017 and replacement equipment was purchased for $11,500 on September 30, 2017. Far East makes all elections to minimize the tax effect of replacing the equipment. Which of the following statements is correct?

a. The 2017 taxable capital gain is $250 and the deemed capital cost of the new equipment is $10,000

b. The 2017 taxable capital gain is $250 and the deemed capital cost of the new equipment is $11,500

c. The 2017 taxable capital gain is $250 and the deemed capital cost of the new equipment is $10,750

d. The 2017 taxable capital gain is $1,000 and the deemed capital cost of the new equipment is $12,000

Answer rating: 100% (QA)

Answer Option a The 2017 taxable capital gain is 250 ... View the full answer