Answered: 1. Which of the following is generally…

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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1. Which of the following is generally excluded from gross income?

a.Dividends

b.Rewards

c.Partnership income

d.Life insurance proceeds paid to the beneficiary

e.None of these choices are correct.

2. Sam died on January 15, 2013 and left his wife, Terry, an insurance policy with a face value of $100,000. Terry elected to receive the proceeds over a 10-year period ($10,000 plus interest each year). This year Terry receives $11,500 ($10,000 proceeds plus $1,500 interest) from the insurance company. How much income must Terry report from this payment?

a.$1,500

b.$11,500

c.$0

d.$500

e.None of these choices are correct.

3. Marie had a good year. She received the following prizes and awards:

- an iPad from The Famous Daytime Talk Show with a fair market value of $500
- lottery winnings of $1,000 received in cash
- a plaque worth $25 plus $100 of Godiva chocolate in recognition for 100 days on the job without an accident
- a $10,000 cash prize from American Idol

How much of her prizes and awards should Marie report on her tax return?

a.$11,000; only cash prizes and awards are included

b.None, they are all excluded from income

c.$11,600; the plaque may be excluded

d.$11,625; everything is included at the highest amount

e.$11,500; the award from her job is excluded

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