Charles Bought an Annuity for $30,000 Several Years Ago

question 81

Multiple Choice

Charles bought an annuity for $30,000 several years ago. The annuity will pay him $250 per month from age 62 until he dies. During the current year, Charles turns 62 and receives his first annuity payment. I. If Charles dies after receiving 192 monthly payments, he must amend prior returns and correct the income reported based on 192 monthly payments. If Charles receives more than 260 payments, the total of each payment received after the II. 260th payment is included from income.

• A) Only statement I is correct.
• B) Only statement II is correct.
• C) Both statements are correct.
• D) Neither statement is correct.

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Definitions:

Credits

Entries that decrease assets or increase liabilities and equity on a company's balance sheet, reflecting the accounting principle of double-entry bookkeeping.

Ending Owner's Equity

Ending Owner's Equity represents the final amount of owner's equity in a business at the conclusion of an accounting period, after accounting for all additions and deductions.

Withdrawals

Withdrawals typically refer to amounts of money taken out from a bank account, but in business, it can also mean money taken out by the owner for personal use, reducing the capital account.

Net Income

The total revenue minus total expenses, indicating the company’s profit or loss over a specific accounting period.