Problemanne purchased an annuity from an insurance company, Ask an Expert

Accounting

Problem:

Anne purchased an annuity from an insurance company that promised to pay her $20,000 per year for the next ten years. Anne paid $145,000 for the annuity, and in exchange she will receive $200,000 over the term of the annuity.

Required:

Question 1: How much of the first $20,000 payment should Anne include in gross income? (Do not round intermediate calculations.)

Question 2: How much income will Anne recognize over the term of the annuity?

Note: Explain all calculation and formulas.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91171567

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