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

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

Financial Accounting

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

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Multiple Choice

Which of the following statements is incorrect regarding the federal income tax treatment of life insurance?

Premiums paid by an individual for their own life insurance are generally not tax-deductible.

If a life insurance policy is surrendered for its cash value, any amount received in excess of the premiums paid is subject to income tax.

Proceeds paid to a beneficiary upon the death of the insured are generally excluded from gross income for federal income tax purposes.

Interest earned on the cash value of a life insurance policy is taxed annually as it accrues.

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Verified step by step guidance

Step 1: Understand the context of the question. The problem is asking about the federal income tax treatment of life insurance, and you are tasked with identifying the incorrect statement among the options provided.

Step 2: Analyze each statement individually. Start with the first statement: 'Premiums paid by an individual for their own life insurance are generally not tax-deductible.' This is a correct statement because life insurance premiums are considered personal expenses and are not deductible for federal income tax purposes.

Step 3: Evaluate the second statement: 'If a life insurance policy is surrendered for its cash value, any amount received in excess of the premiums paid is subject to income tax.' This is also correct because the excess amount represents a gain and is taxable as income.

Step 4: Review the third statement: 'Proceeds paid to a beneficiary upon the death of the insured are generally excluded from gross income for federal income tax purposes.' This is correct because life insurance death benefits are typically not subject to federal income tax.

Step 5: Examine the fourth statement: 'Interest earned on the cash value of a life insurance policy is taxed annually as it accrues.' This is incorrect because the interest earned on the cash value of a life insurance policy is generally tax-deferred and not taxed annually. Therefore, this is the incorrect statement.