Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Which of the following best describes the investment gains from a universal life insurance policy?

They are exempt from all forms of taxation.

They are immediately distributed to policyholders as dividends.

They are taxed annually as ordinary income.

They accumulate on a tax-deferred basis until withdrawn.

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Verified step by step guidance

Understand the concept of a universal life insurance policy: It is a type of permanent life insurance that combines a death benefit with a savings component, allowing policyholders to accumulate investment gains over time.

Recognize the tax treatment of investment gains in universal life insurance policies: These gains are not taxed annually as ordinary income, nor are they exempt from all forms of taxation. Instead, they are subject to specific tax rules.

Clarify the term 'tax-deferred': Tax-deferred means that the policyholder does not pay taxes on the investment gains as they accumulate. Taxes are only due when the gains are withdrawn or distributed under certain conditions.

Eliminate incorrect options: Investment gains are not immediately distributed as dividends, nor are they exempt from taxation. They are also not taxed annually as ordinary income, which leaves the correct description as tax-deferred accumulation.

Conclude that the correct answer is: Investment gains from a universal life insurance policy accumulate on a tax-deferred basis until withdrawn, aligning with the tax advantages typically associated with such policies.