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Advanced Accounting 11th Edition by Paul Fischer,William Tayler, Rita Cheng
Edition 11ISBN: 978-0538480284Advanced Accounting 11th Edition by Paul Fischer,William Tayler, Rita Cheng
Edition 11ISBN: 978-0538480284 Exercise 17
Private universities, annuity and life income. Record the following annuity and life income activities of Private University:
1. On July 1, 2010, R. W. Fields, emeritus professor of accounting, moved out of the state. Fields donated to the university common stock with a cost basis of $30,000 and a fair value of $90,000. Fields is to receive an annuity of $6,000 each year for life; at death, the securities are to be sold and the remaining cash balance is to be transferred to the student loan fund. At a 10% annual rate and a life expectancy of 12 years, the present value of the annuity payments is $34,068.
2. The stock paid $3,400 in dividends each 12-month period.
3. The annuities payable account is adjusted to present value. At year-end, a payment of $6,000 is made to Professor Fields.
4. The annuities payable account is adjusted to present value. A second payment was made a year later.
5. A month later, Professor Fields died, eliminating the liability for future annuity payments.
6. The common stock was sold for $97,000. The cash balance was transferred to the student loan fund.
1. On July 1, 2010, R. W. Fields, emeritus professor of accounting, moved out of the state. Fields donated to the university common stock with a cost basis of $30,000 and a fair value of $90,000. Fields is to receive an annuity of $6,000 each year for life; at death, the securities are to be sold and the remaining cash balance is to be transferred to the student loan fund. At a 10% annual rate and a life expectancy of 12 years, the present value of the annuity payments is $34,068.
2. The stock paid $3,400 in dividends each 12-month period.
3. The annuities payable account is adjusted to present value. At year-end, a payment of $6,000 is made to Professor Fields.
4. The annuities payable account is adjusted to present value. A second payment was made a year later.
5. A month later, Professor Fields died, eliminating the liability for future annuity payments.
6. The common stock was sold for $97,000. The cash balance was transferred to the student loan fund.
Explanation
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2.
• Cash is an income, which increase...
Advanced Accounting 11th Edition by Paul Fischer,William Tayler, Rita Cheng
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