In December 2016 a Donor to a College Established a Trust

question 77

Short Answer

In December 2016 a donor to a college established a trust in which college receives $ 5,000,000 to be invested. The donor's spouse is to receive $ 40,000 of the income per year for ten years. At that point, the assets and income revert to the college. The college estimates that the present value of the anticipated receipts from the trust amount to $ 4,800,000. How should this $ 4,800,000 be recorded in 2016, assuming

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Definitions:

Economies Of Scope

Cost advantages that enterprises obtain by producing a wide variety of products, rather than specializing in the production of a single product or a very few products.

Economies Of Scale

A situation where the cost per unit of output decreases as the scale of production increases.

Unit Costs

The cost incurred by a company to produce, store, and sell one unit of a particular product or service.

Diseconomies Of Scope

A situation where the cost of producing multiple products or services together is higher than producing them separately.