Kelsey Nicholas contributes $80,000 to Wagner University requesting that she receive $5,000 annually for the rest of her life, after which, the university may spend the funds as it sees fit.The journal entry to record this gift would include:

Question

Kelsey Nicholas contributes $80,000 to Wagner University requesting that she receive $5,000 annually for the rest of her life, after which, the university may spend the funds as it sees fit.The journal entry to record this gift would include:​

Quizplus · Accepted Answer

The journal entry would include a credit to Annuities Payable for the present value of the expected payments over Kelsey's lifetime. This is because the university will owe Kelsey $5,000 annually for the rest of her life, so this liability must be recorded. The present value of Kelsey's expected payments should be credited to Annuities Payable. There is no need to record an expense for this annuity because it is not an actual cash outflow for the university until Kelsey receives the payments. Therefore, options A and C are incorrect. Option B would only be correct if Kelsey had requested a lump sum payment rather than annual payments.

Kelsey Nicholas Contributes $80,000 to Wagner University Requesting That She