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