Charles and Camillagot Divorced in 2018

question 92

Multiple Choice

Charles and Camillagot divorced in 2018. Under the terms of the decree Charles pays Camilla $50,000 in cash in each of the next five years (or until Camilla's death or remarriage) . In addition, Charles transferred a castle worth $2,000,000 to Camillain 2018 and will pay $12,000 per year to support their son, Clyde, until he turns 19 years old. What amount (if any) is included in Camilla's gross income in 2020?

• A)$2,062,000
• B)$12,000
• C)$50,000
• D)$2,050,000
• E)None of the payments are included in gross income.

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Definitions:

Partial Balance Sheet

A partial balance sheet presents only a section of a company's financial statements, typically focusing on either assets, liabilities, or equity at a specific point in time.

Bad Debts Expense

An expense account reflecting the cost of accounts receivable that a company does not expect to collect.

Direct Write-Off Method

The method of writing off uncollectibles when they occur and thus not using the Allowance for Doubtful Accounts. This method does not fulfill the matching principle of accrual accounting.