Adjusting entry to record insurance expense for current year

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Reference no: EM132016353

1. A four-year insurance policy in the amount of $20,000 was purchased two years ago. What is the adjusting entry to record insurance expense for the current year?

A) DEBIT: Insurance Expense for $20,000; CREDIT: Prepaid Insurance for $20,000

B) DEBIT: Insurance Expense for $5,000; CREDIT: Prepaid Insurance for $5,000

C) DEBIT: Prepaid Insurance for $20,000; CREDIT: Insurance Expense for $20,000

D) DEBIT: Prepaid Insurance for $5,000; CREDIT: Insurance Expense for $5,000

2. Abraham reports the following income and loss in the current year.

Salary $ 72,000

Income from activity A 20,000

Loss from activity B (10,000)

Loss from activity C (15,000)

All three activities are passive activities with respect to Abraham. Abraham also has $16,000 of suspended losses attributable to activity B carried over from prior years. During the year, Abraham sells activity B and realizes a $14,000 taxable gain. What is Abraham's AGI as a result of these transactions?

A) $50,000

B) $58,000

C) $65,000

D) $77,000

Reference no: EM132016353

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