Carin, a Widow, Elected to Receive the Proceeds of a $150,000

question 24

Multiple Choice

Carin, a widow, elected to receive the proceeds of a $150,000 life insurance policy on the life of her deceased husband in 10 installments of $17,500 each.Her husband had paid premiums of $60,000 on the policy.In the first year, Carin collected $17,500 from the insurance company.She must include in gross income:

• A)$0.
• B)$2,500.
• C)$10,000.
• D)$25,000.
• E)None of these.

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Definitions:

Useful Life

The estimated period an asset is expected to be used before it is deemed no longer useful for operations.

Units-Of-Activity

A depreciation method that allocates cost based on the actual usage, work performed, or units produced by an asset.

Asset’s Use

The utilization of an asset in a way that enhances its value or contributes to earning revenue.

Manufacturing Company

A company that uses raw materials, labor, and equipment to produce finished goods on a large scale.