Jerry Purchased an Annuity Contract at the Beginning of 2003

question 126

Multiple Choice

Jerry purchased an annuity contract at the beginning of 2003 for $144,000.The contract specified that he and his wife would receive $1,000 per month for life.Jerry receives his first payment on February 1,2017 when he is 59 years old and his wife is 56 years old.What amount of gross income should Jerry and his wife report on their 2017 income tax return from this annuity contract?

• A)$-0-
• B)$4,400
• C)$6,600
• D)$11,000

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Definitions:

Fabricating Department

A section within a manufacturing company where raw materials are assembled or processed into finished products.

Weighted-Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory value based on the average cost of all items available for sale during the period.

Equivalent Unit

A concept in cost accounting used to allocate costs to partially completed goods, equating them to an amount of finished goods.

Fabricating Department

A section within a manufacturing facility where raw materials are transformed into components or products through various processes like cutting, assembling, or molding.