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In: Accounting

Investment-Related Exclusions (LO. 6) Rona receives the following items during the current year: Interest on savings...

Investment-Related Exclusions (LO. 6)

Rona receives the following items during the current year:

Interest on savings account $600
Dividends on Microsoft stock 400
Interest on Guam development bonds 1,700
Dividend on life insurance policy 400
(The company is a mutual life insurance company, and the dividend is a return of part of the premium she paid on the policy.)

In addition, Rona owns 1,600 shares of Cochran Corporation common stock. Cochran has a dividend reinvestment plan through which stockholders can receive a stock dividend equal to 4% of their holdings in lieu of a cash dividend of equal value. Rona takes the 64 shares of stock, which are worth $6 per share.

Rona has a gross income of $ for the current year.

Solutions

Expert Solution

Rona has a gross income of $1384 for the current year.

Interest on savings account

600

Dividends on Microsoft stock

400

Stock dividend (1600*4%*6)

384

Gross income

1384

Guam is a possession of the United States, so it is not included.

Dividend on life insurance policy is a return of capital investment and thus not included.

ekkarill92 answered 2 years ago
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