Mrs. Ryes, a sole proprietor doing business under the trade name “Cheesy Cakes’, had seen her business booming because of the introduction of the hit flavor Red Macaroon Velvet Cakes. However, a series of natural disasters and misinformed business decisions had caused Mrs. Ryes to suffer losses, the details of which follow:An equipment with book value of P400,000 that was inundated by floods. The equipment was not insured and can be repaired for P500,000 to be reusable again.Another equipment with a book value of P330,000 and a fair market value of P440,000 swept by the same flood. The equipment is totally lost and is insured only up to P100,000Also swept in the same flood are Mrs. Reyes’ appliances inside her home. The appliances were purchased two years ago at an aggregate cost of P1,000,000 with an expected useful life of 5 yearsHow much loss can be claimed by Mrs. Reyes as an allowable deduction?

The loss from natural disasters means the loss that is caused by natural events like floods, storms,…

Answered: Mrs. Ryes, a sole proprietor doing…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Mrs. Ryes, a sole proprietor doing business under the trade name “Cheesy Cakes’, had seen her business booming because of the introduction of the hit flavor Red Macaroon Velvet Cakes. However, a series of natural disasters and misinformed business decisions had caused Mrs. Ryes to suffer losses, the details of which follow:

An equipment with book value of P400,000 that was inundated by floods. The equipment was not insured and can be repaired for P500,000 to be reusable again.
Another equipment with a book value of P330,000 and a fair market value of P440,000 swept by the same flood. The equipment is totally lost and is insured only up to P100,000
Also swept in the same flood are Mrs. Reyes’ appliances inside her home. The appliances were purchased two years ago at an aggregate cost of P1,000,000 with an expected useful life of 5 years

How much loss can be claimed by Mrs. Reyes as an allowable deduction?

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