In 2017, Sarah (Who Files as Single) Had Silverware Worth

question 83

Multiple Choice

In 2017, Sarah (who files as single) had silverware worth $10,000 (basis $6,000) stolen from her home.Her insurance company told her that her policy did not cover the theft.In 2017, Sarah's other itemized deductions were $2,000, and she had AGI of $30,000.In February 2019, Sarah's insurance company decided that Sarah's policy did cover the theft of the silverware and they paid Sarah $5,000.Determine the tax treatment of the $5,000 received by Sarah during 2019.

• A)None of the $5,000 should be included in gross income.
• B)$2,900 should be included in gross income.
• C)$5,000 should be included in gross income.
• D)Last year's return should be amended to include the $5,000.
• E)None of these.

---

Definitions:

High-low Method

An approach in cost accounting to determine variable and fixed charges, based on analyzing the activity's minimum and maximum levels.

Job-Order Costing

A costing system used in situations where many different products, jobs, or services are produced each period.

Process Costing

A costing method used when essentially homogeneous products are produced on a continuous basis.

Cost Reconciliation Report

A financial report that reconciles the estimated, budgeted, or standard costs with the actual costs incurred.