The Following Selected Transactions Affecting the Annuity and Life Income

question 54

Essay

The following selected transactions affecting the Annuity and Life Income Funds of Tremper State University (public) occurred during the current fiscal year.
a.
Upon his death, John Sooner, a local businessman, donates a portfolio of stock with a cost basis of $100,000 and a market value of $125,000. John's wife is to receive an annuity of $8,000 per year for life. Her life expectancy is ten years. An estimated rate of return of 8% yields a present value of $53,681 for the annuity.
b.
Dividends of $7,500 are received from Life Income Fund investments.
c.
Annuity fund investments with a book value of $6,000 are sold for $6,500.
d.
The beneficiary of the life income investments described in part (b) are paid.
e.
The first annuity payment to John Sooner's wife is made from part (a).
Required:
Make the journal entries necessary to record the transactions.

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Definitions:

Departmental Overhead Rate

A rate used to allocate overhead costs to specific departments, calculated based on the relationship between indirect costs and activity level.

Own Allocation Base

Refers to the specific denominator that a company chooses to allocate indirect costs to different cost objects, based on their usage or benefit from those costs.

Plantwide Overhead Rate

A single overhead absorption rate used throughout a manufacturing facility to allocate overhead costs to products.

Volume-Based Measures

Metrics that quantify outcomes or activities based on the amount or volume of production, sales, or other business operations.