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Green Valley (GV) Sporting Goods is a retailer specializing in the sale of camping, hiking...

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Accounting

Green Valley (GV) Sporting Goods is a retailer specializing in the sale of camping, hiking and fishing equipment. GVs flagship store (means its main store) is located in Moore, OK, a suburb of Oklahoma City. However, GV also has two smaller stores located in Wichita, KS and Springfield, MO. During the current year, a tornado destroyed the Moore store completely leveling the building and destroying all the content of the building. The building had a cost basis to GV of $6 million and a fair value of $11 million at the time of the tornado. The contents of the building (except for the inventory) had a cost basis of $2 million and a fair value of $0.5 million at the time of the tornado. Finally, the inventory destroyed from the tornado had a cost basis of $1.2 million and a fair value of $1.8 million. The buildings and contents of the other GV stores were undamaged. The insurance company paid to have the Moore building rebuilt which cost the insurance company $12 million. The insurance company also paid $700,000 in cash for the contents of the building and $1.9 million for the inventory.

What is the basis in the building to GV after it was rebuilt?

Multiple Choice

  • $6 million

  • $11 million

  • $12 million

  • None of the above

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