Bret Carries a $200,000 Insurance Policy on His Life and Has

question 73

Multiple Choice

Bret carries a $200,000 insurance policy on his life and has paid premiums of $10,000 over the years.Dividends on the policy have totaled $8,500.Each year Bret has left the dividends with the insurance company.In the current year,the insurance company credited $800 of interest on the accumulated dividends to Bret's account.In addition,$600 of dividends was added by the insurance company.In the current year,Bret must report income of

• A)$0.
• B)$600.
• C)$800.
• D)$1,400.

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Definitions:

Residual Income

The income that exceeds the minimum required return on an investment or business segment.

Residual Income

The amount of income that exceeds the minimum rate of return expected on a project or investment.

Required Rate Of Return

The minimum annual percentage return an investor expects to achieve by investing in a particular asset or project.

Net Operating Income

A measure of a company's profitability, calculated as the difference between total revenue and operating expenses, excluding taxes and interest.