David Has Been Diagnosed with Cancer and Is Expected to Live

question 51

Multiple Choice

David has been diagnosed with cancer and is expected to live less than 18 months.David is covered by a life insurance policy with a $400,000 face amount.David cashes in the policy early under a special option and receives 80% of the face amount or $320,000.In the year of collection,David will report

• A)no income.
• B)$80,000.
• C)$320,000.
• D)$400,000.

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Definitions:

Inventory

The total amount of goods and materials held by a business for the purpose of resale or production.

Contradict

to assert the opposite of a statement made by someone, implying disagreement or denial.

Automates

The process of making an operation or procedure carried out without human intervention through the use of mechanical or electronic devices.

Agency

A relationship where one party (the agent) is authorized to act on behalf of another (the principal) in dealing with third parties.